LME MORNING - Base metals rally one pct after China stimulates and Spain signals cuts

By: Eddie van der Walt

London 28/09/2012 - Base metals made healthy gains in LME premarket trading on Friday, rising about one percent on renewed risk appetite following some policy direction from Spain and further easing in China.

In Spain, finance minister Luis de Guindos delivered the widely anticipated budget cuts, bringing the country closer into line with European Union recommendations and paving the way for the country to accept a bailout.

"This morning the markets look more upbeat on brighter economic news and following Spain's announcement of further austerity measures yesterday, which means it may be closer to asking for help," FastMarkets analyst William Adams said.

Yields on Spain's 10-year bonds, which rose back above six percent earlier in the week, are steadier this morning at 5.88 percent.

Also providing support was China's injection of a record 365 billion yuan ($58 billion) into money markets on Thursday, a move aimed at relieving a credit squeeze ahead of an eight-day national holiday.

But analysts, including ANZ, have warned to expect volatility ahead the holiday, which starts on Sunday, September 30 with Mid-Autumn Day, and which is then followed by National Day from October 1 to 7.

In a busy end of the week for data, Japan's September manufacturing PMI climbed to 48 from 47.7 and August retail sales were up 1.8 percent but housing starts fell 5.5 percent and industrial production dipped 1.3 percent last month.

In today's data out of Europe, the EU-wide flash CPI at 2.7 percent came in above the expected 2.4 percent and the previous reading of 2.6 percent, while Italy's preliminary CPI of 0.0 percent was better than the forecast drop of -0.1 percent but below the previous 0.4 percent. German retail sales also climbed 0.3 percent in August

Later, French consumer spending, the UK index of services and US personal spending and income, Chicago PMI and University of Michigan consumer sentiment and inflation expectations are also due.

In other commodities, Brent crude oil climbed 47 cents to $112.86 per barrel and gold gained $3.84 to $1,780.88 per ounce. In currencies, the euro was more than a third of a cent higher against the dollar at 1.2947, with the dollar index at 79.41, down 0.16.

In equities, the Nikkei is down 79 points at 8,870 and the FTSE 100 is up around 16 points at 5,794.


Copper was last at $8,275 per tonne, up $100 or about 1.2 percent on Thursday's close, with about 6,000 lots traded on Select as of 10:15 BST.

"[But] we still would want to sell into near-term strength as [copper] prices look likely to move down to $8,000, and possibly $7,800, in the next four to six weeks," ANZ said.

Stocks fell 625 tonnes, with New Orleans receiving 1,000 tonnes and Busan releasing 1,100 tonnes. Cancelled warrants are 950 tonnes higher at 40,825 tonnes.

Aluminium gained ground too, also adding 1.2 percent or $25 to $2,133 this morning. Cancelled warrants fell 11,150 tonnes to 1,594,100 tonnes. Stocks dropped 8,400 tonnes to 5,055,850 tonnes, with Detroit releasing 3,050 tonnes.

Zinc was last at $2,122.25, up a strong $28 or 1.8 percent. Stocks climbed 8,075 tonnes to 991,375 tonnes, with 8,650 tonnes entering New Orleans. Cancelled warrants at 358,625 tonnes are 2,050 tonnes lower.

Lead was at $2,301, up $31, with stocks again falling, this time down 2,950 tonnes at 267,700 tonnes. Cancelled warrants at 82,700 tonnes are 2,950 tonnes lower.

"Even if there is much to suggest further rises in lead prices, we regard the latest price hike as exaggerated and believe there is a short-term risk of profit-taking," Commerzbank said.

Tin increased $405 to $21,600, with inventories increasing 100 tonnes to 12,255 tonnes and cancelled warrants down 500 tonnes at 6,365 tonnes.

Nickel at $18,586, up $241 on the close, is holding just short of a six-month high. Stocks increased by 324 tonnes to 122,580 tonnes, with cancelled warrants up the same amount to 17,076 tonnes.

"Nickel prices continue to look robust," FastMarkets' Adams said.

Steel billet is quoted at $330/370 and cobalt at $27,300/30,300 while molybdenum was offered at $24,000.

(Editing by Mark Shaw)