LME MORNING - Metals range routinely at mixed levels, watch currency markets

By: Martin Hayes

London 29/12/2011 - Base metals locked in to a sideways pattern during Thursday LME pre-market trading, moving off early lows to stand mixed in low-key activity - matching the pattern in other financial markets.

"It is a bit drifty today but the phones are not ringing - it is all going through on the screen," a trader said. “The only enquiries we are getting are people looking to tidy up stuff for the year-end.”

"It does react to news, so that Italian auction and US jobs figures later - if they hit the currency again - could kick it off," he added.

As has been the recent pattern, the complex is reacting to wider financial market worries - notably eurozone jitters, which came to the fore on Wednesday, when the euro fell to an 11-and-a-half-month low on worries over Italian borrowing costs.

The euro, earlier at a fresh low of 1.2885 against the dollar, settled around 1.2900. Equity markets, meanwhile, were flat.

Today, Italy sold some 7 billion euros of debt. A yield of 5.62 percent was seen for new three-year debt, while the 10-year yield level was 6.98 percent.

Later today, there are US economic releases - November pending home sales, the December Chicago PMI and weekly unemployment claims

Although the shortened period between the Christmas and New Year holiday closures often sees dull and listless trading, current nervousness is likely to spark rapid price swings in both directions, triggered by newsflow and data events.

"We still think the market will suffer from lack of interest and drift over the next few days and that year-end will see more selling pressure, if anything, as concerns remain about Europe and a slowdown in China," broker RBC said.

Over the weekend, meanwhile, China's official Manufacturing PMI will be released on Saturday, and if manufacturing activity has contracted this month it may well point to further monetary easing there, some traders said.


Copper was swinging either side of $7,400, trading recently at $7,390 per tonne, down $75 from Wednesday's weak close - prices fell nearly three percent in the previous session. Inventory drawdowns continued, with a net 1,225-tonne stock fall to 370,400 tonnes today.

Aluminium was under pressure below $2,000 again, falling to $1,987, a $12 loss. Stocks fell 1,775 tonnes from what had been all-time highs to 4,969,600 tonnes.

Nearby spreads remain tight, however, with TOM/next (tomorrow/next day) trading between $7.00 and $5.00 backwardation - it was recently at $6.00. Cash/Jan traded at $3.00 backwardation, while cash over the year-end was trading at premiums of $5.00 and $3.00.

In other metals, zinc was just $1.50 higher at $1,812 - stocks dropped 1,750 tonnes to 823,525 tonnes. Lead dipped $5 to $1,955, although stocks declined 2,925 tonnes to 353,250 tonnes.

Nickel traded at $17,769, below a previous $17,900/17,905 - inventories dropped 300 tonnes, however. Tin at $18,900 was $300 higher but stocks were up 60 tonnes.

Steel billet eased $5 to $535/555. Cobalt and molybdenum were indicated at $29,500/31,967 and $28,000/30,750 respectively.

(Editing by Mark Shaw)