LME MORNING - Base metals drop ahead of Labor Day weekend

By: Eddie van der Walt

London 30/08/2013 - Base metals were uniformly lower in early trading on the LME on Friday as the extended US Labor Day weekend approaches.

Liquidation and technical sales weighed on prices, pushing most of the metals to multi-week lows, against a backdrop of hostility to a potential intervention in Syria and renewed Federal Reserve tapering talk.

"Commodity markets were under selling pressure on Thursday as concerns about an imminent air strike in Syria faded and Fed tapering discussions resurfaced," Credit Suisse said. "We think commodity markets could lose some momentum in the days ahead."

The Syria issue continues to hang nervously in the background but markets may adopt a wait-and-see attitude before jumping on the 'risk-off' bandwagon again after the UK government has rejected military intervention for now.

In wider markets, the dollar is down fractionally against the euro at 1.3245 but gained around 0.6 cents on Thursday.

In data released so far today, Japanese preliminary industrial production was up 3.2 percent compared with -3.1 percent in the previous month.

In Europe, German retail sales at -1.4 percent for July undershot the expected 0.5 percent, while the Italian quarterly and monthly unemployment rates were around expectations and the EU-wide rate was unchanged at 12.1 percent.

The CPI flash estimate for the EU at 1.3 percent for August missed the expected reading of 1.4 percent and was below the previous month’s 1.6 percent.

The US will release personal spending and income data, the Chicago PMI and revised UoM consumer sentiment and inflation expectations this afternoon.

In the metals, copper set a three-week low today at $7,122.50 before recent trade at $7,131.75, down $18.25, with around 10,300 lots having traded on Select by 10:00 BST. Stocks rose a net 10,325 tonnes to 588,000 tonnes, with cancelled warrants climbing 3,950 tonnes to 284,000 tonnes.

Aluminium also set a three-week low at $1,815 and was last at $1,829.50, down $5.50. Inventories fell 6,700 tonnes to 5,400,350 tonnes, with cancelled warrants 4,000 tonnes lower at 2,007,275 tonnes.

Nickel, tin and zinc also set three-week lows and lead dipped to a two-week low. Nickel was last $229 lower at 13,846, zinc was $21.50 lower at $1,913.50, lead was down $28 at $2,167 and tin dipped $322 to $21,083.

Lead stocks dipped 525 tonnes to 185,675 tonnes and zinc inventories fell 5,072 tonnes to 1,005,325 tonnes but tin stocks rose 150 tonnes to 15,440 tonnes.

Steel billet was indicated at $150/200, with inventories and cancelled warrants both dropping 520 tonnes to 38,220 tonnes and 23,920 tonnes respectively.

In minor metals, cobalt was quoted at $26,250/31,000 but molybdenum was neglected.

(Additional reporting by Lynette Tan, editing by Mark Shaw)