LME MORNING - Metals retreat, euro weakness highlights suspect sentiment

By: Martin Hayes

London 05/01/2012 - Base metals made fresh retreats during Thursday LME pre-market trading, with a fresh slide in the euro highlighting unresolved eurozone sovereign debt turmoil, which continues to weigh on market sentiment.

The euro fell to 1.2829 against the dollar, its lowest since September 2010, in the wake of today's European bond auction - France sold 30 year bonds at an average yield of 3.97 percent and 10-year bonds at an average yield of 2.29 percent.

Analysts said that while fund repositioning and index rebalancing commence, further risks of downward pressures remain on the metals, which yesterday erased a start-of-the-week rally.

"We feel the base metals are going to struggle on the upside and therefore would not be surprised if the New Year rally was short-lived," FastMarkets analyst William Adams said.

Europe's economic problems and the knock-on impact on stock market and currencies will result in choppy trading conditions continuing in the medium term, with the metals complex struggling for clear direction.

US data events will also play a part - today weekly employment numbers at 1330 GMT will be released ahead of the key December non-farm payrolls report on Friday. In addition, December's ISM non-manufacturing index will be released at 1500 GMT.

Over the next few sessions, market players will be also watching whether the Chinese government lowers the bank reserve ratio again to stimulate growth.


Copper, which had been above $7,600 earlier, eased below $7,500 to $7,485 per tonne, a $55 loss from Wednesday. Inventories fell again - down a net 750 tonnes to 368,400 tonnes, a fresh low since December 2010.

Aluminium eased to $2,040, a $24 loss, although inventories eased from yesterday's all-time high. The 2,550-tonne stock fall saw stocks at a still-hefty 4,980,625 tonnes.

More metal - 1,500 tonnes - was shipped out of Vlissingen, although with 497,000 tonnes under cancelled warrant the queue there is some 15 months.

In other metals, zinc dropped to $1,850, a $19 loss, with stocks seeing a modest 150-tonne increase to 820,900 tonnes. Lead traded at $2,039, down $21, although inventories declined 1,225 tonnes.

Nickel eased to $18,575, down $225, while inventories were up 288 tonnes at 89,838 tonnes. Tin at $19,678 was up $78, with stocks falling 435 tonnes to 11,360 tonnes, the lowest since April 2009.

Steel billet traded at $539.50 against a previous $540/545. In the minors, cobalt was unchanged at $31,750, while molybdenum was indicated at $29,300/30,750.

(Additional reporting by Clara Denina, editing by Mark Shaw)