LME MORNING - Metals prices edge higher in sentiment-, currency-driven rally

London 07/10/2010 - Base metals rallied softly on Thursday morning but volumes remained low before China’s return to the markets tomorrow, while the dollar provided an effective cushion from any major falls.

“Panic buying is in the air and the public’s participation is high and rising,” Dennis Gartman, author of the Gartman Letter, said on Thursday, conceding that now is not the time to be short.

Bank of England governor Mervyn King came under pressure to stimulate the UK economy just as the US and Japanese central banks have turned their focus towards more quantitative easing measures to rejuvenate their fragile economies.

Further easing by US and Japanese authorities may strengthen sterling relative to their currencies, further undermining the UK recovery.

European equities fell on Thursday morning before the Bank of England and the European Central Bank are expected to keep interest rates at record low levels of 0.5 and 1 percent respectively.

The dollar dropped to a 15-year low against the yen and to its weakest in eight months against the euro, trading as low as 1.3985 before settling at 1.3975.

In addition, governments around the world run the risk of derailing economic recovery if all insist on weakening their currencies, IMF official managing director Dominique Strauss-Kahn warned on Wednesday.

The real estate sector received bad news on Thursday - UK house prices fell 3.6 percent in September from a month earlier, while manufacturing grew at its slowest rate in 10 months that month.

In the afternoon, weekly US initial jobless claims will be announced at 13:30 BST, with economists expecting a reading of 455,000. Claims have been stuck inside a very tight range of 425,000-500,000.

Though new claims have dropped below half a million - far below the levels during the worst of the recession from 2008 to 2009 - they are still well above the typical levels found during the last recession.

On Friday, the decisive US non-farm payrolls figures will be released, with economists expecting zero job growth for the month of September compared with a fall of 54,000 jobs during August.

“Given the strong medium-term fundamentals, we would argue that even a weak reading would only trigger a temporary setback,” Credit Suisse said.


Tin, which hit a fresh all-time high of $26,790 on Wednesday, settled at $26,475, up $175 from the previous session, as concerns mount regarding production problems in Indonesia and China.

Tin stocks are the lowest since May 7, 2009 and have halved from this year’s peak from February this year, during which time the price has risen 55 percent.

“The situation is unlikely to ease in the coming months as the Association of Indonesian Tin Industry has stated that it expects exports to fall further from current levels,” analysts at Commerzbank said on Thursday.

Copper pushed higher off the previous session, trading $21 higher at $8,270, having hit a two-and-a-quarter-year high of $8,326 on Wednesday.

Inventories fell a net 675 tonnes to 373,450 tonnes - their lowest since November 2, 2009 - and cancelled warrants rose 3,250 tonnes to 19,625 tonnes.

The red metal is prepared to challenge its mid-2008's all-time high of $8,940 but those highs established between 2006 and 2008 still represent a formidable obstacle - upside progress is likely to be choppy.

Aluminium met resistance around $2,400 this morning, trading at $2,382, up $17 from Wednesday. Aluminium stocks fell for the 16th day in a row and are at their lowest since mid-June 2009.

Nickel traded at $24,800, in line with yesterday’s close, after hitting $25,200 on Wednesday, its highest level since early May.

Zinc traded down $2 at $2,332 while lead fell $4 to $2,312. Lead stocks fell from what were the highest since May 2000, while zinc stocks fell for the fifth day in a row to their lowest since May 24.

Steel billet was indicated at a wider at $450/470 while, in the minor metals, cobalt was indicated at $36,800/40,000 per tonne and molybdenum was indicated at $30,500/37,500.

(Editing by Mark Shaw)