LME MORNING - Base metals buoyed, risk appetite improves on global stimulus hopes

By: Kathleen Retourne

London 19/07/2012 - Base metals made a brighter start on Thursday, rising on positive US housing starts data yesterday and hopes of further stimulus from China.

 “There is talk that the capital bank ratio may be cut further today,” a trader said. “Markets are looking at that and stocks are up. Should this happen we could see more risk appetite return to the market.”

Should the People's Bank of China cut rates, it would be the fourth time in a relatively short period it has done so. But some participants believe that the central bank will await action from the US - including further quantitative easing - before approving any further rate cuts.  

“Metals, above all copper, made a strong recovery yesterday afternoon following early losses and are also continuing to gain this morning, finding support from firm Asian equity markets,” Commerzbank said.

The metals were also buoyed by the release of US housing starts data for June, which climbed to their highest level since October 2009 at 760,000, beating the forecast for 740,000 and an increase from 710,000 in May.

June building permits was also supportive - these figures came in only slightly below expectations, indicating that the US housing market continues to recover.

Housing also provided good news from China, where residential apartment prices stayed flat in June. Prices had been falling since last summer but "the cumulative decline of 1.5 percent has been modest", Credit Suisse said.

Many market participants also hope that the US Federal Open Market Committee (FOMC) is on the verge of stoking simmering growth by providing further monetary stimulus.

During his two-day testimony to Congress this week, chairman Ben Bernanke declined to give a clear indication of an imminent rollout of fresh money into the US economy but he reiterated the committee's view that it would act if employment failed to pick up.

The committee again meets on July 31.


MORE OPTIMISM

Copper at $7,721.75 per tonne was around intraday highs, up $84.75 on the previous day’s close. Total inventories slipped to 363,550 tonnes, down a net 1,025 tonnes. The run of large increases in South Korean locations ended today, with a 1,300-tonne drop in Busan. Cancelled warrants were also lower, falling 2,350 tonnes to 53,750 tonnes.

 Aluminium rose $7 to $1,916 after inventories declined 5,950 tonnes to 4,802,550 tonnes although cancelled warrants declined for the fourth consecutive day, falling 6,600 tonnes to 1,760,875 tonnes.

Nickel gained $97 to $16,197 despite a further increase in stocks of 1,848 tonnes to 111,174 tonnes, the highest since June 17 last year. Vlissingen was once more responsible for the rise - inventories there rose 2,514 tonnes to 8,538 tonnes and are now up 144 percent on the start of the week when they stood at just 3,498 tonnes.

Zinc climbed $5 to at $1,874 after inventories halted a three-day increase, falling 2,200 tonnes to 1,012,375 tonnes.  Cancelled warrants at 178,125 dropped 3,400 tonnes.

“In 10 of the past 11 months alone, supply outpaced demand on the global nickel market,” Commerzbank said. "The high supply is also resulting in climbing inventories: on the LME, nickel stocks recently increased to a good 109,000 tonnes, putting them at their highest level for 13 months."

"Zinc stocks actually broke through the 1 million tonne mark for the first time since April 1995," it added. "This should prevent prices of both zinc and nickel making any sharp gains."

Lead was unchanged at $1,910 - stocks declined 1,975 tonnes to 339,675 tonnes and cancelled warrants at 47,450 tonnes were down 2,200 tonnes.

Tin gained $90 to $18,890. Inventories fell to the lowest since March 19, dropping 200 tonnes to 11,715 tonnes.

Steel is little changed at $405/415. In minor metals, cobalt was indicated at $27,300/28,250 and molybdenum was offered at $28,000.


(Additional reporting by Eddie van der Walt, editing by Mark Shaw)

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