LME MORNING - Metals trade sideways ahead of US GDP; dull inventory data and soft euro check rally

London, 30 July 2010 - Base metals settled into a narrow sideways pattern during Friday's LME morning session, trading broadly in mid-range as the complex marked time ahead of a string of US releases this afternoon, including the GDP flash and a consumer sentiment index.

"Activity is likely to be muted around current levels ahead of the US GDP figures," LME RDM Sucden said.

The market was pulled back to some extent by the latest daily warehouse report, which showed more increases than declines in stocks, while a softer euro and sluggish equities contributed to the generally lower price trend. Business is seen perking up later due to the data-flow and expected end-month gyrations towards the close.

"The complex will be looking to broader risk sentiment for direction in the coming sessions but, with most of the metals having cleared overhead resistance and the technicals suggesting further upside momentum... there is scope for further gains," James Moore at FastMarkets said.

A dull tone elsewhere in the financial sector kept the metals complex on the defensive, however, as some worries circulated that the forthcoming US growth data may surprise on the downside.

"[Today] brings month-end and the usual shenanigans that go along with it for the close but we are certain a lot of people will be watching the close as an indicator of direction next week," a trader said.

For the metals the latter part of July - the start of the second half - has seen unusually strong rallies, although whether this can be sustained during what is customarily the slowest industrial month of the year probably hinges on technical factors.

The market may range until early afternoon and the release of second-quarter US GDP data, which is due at 1230 GMT - statistics in the past month have come in lower than expected and this release may also undershoot. Economists forecast US growth to have slowed to 2.5 percent in the three months to June from 2.7 percent in the first quarter.

But those US figures recently that have been positive have injected upside momentum into the metals; a similar reaction could well be seen later today, given that sentiment and momentum in the short term is slanted to the upside.

"If they come out on the positive side, they should lend further support to the sector," Credit Suisse said.

In other markets, Asian stocks sagged earlier while European shares were 0.3 percent lower after Wall Street fell on Thursday when US technology firms offered glum outlooks. The euro, which had hit an 11-week high at 1.3106 against the dollar on Thursday, was trading back below 1.31 around 1.3035.

COPPER AND NICKEL INVENTORIES RISE AGAIN

Copper, which hit is highest since early May at $7,283 on Thursday, slipped back below $7,200 after another stock increase at LME-listed warehouses. Prices eased back to intraday lows just below $7,170, trading recently at $7,190 per tonne, down $41.

There was a net 1,975-tonne increase in LME stocks, the second in a row, which lifted the total to 413,500 tonnes. Although SHFE weekly inventories fell 9,415 tonnes, this had been expected.

Nickel also eased back after inventory data, with business at $20,570, down $105. Stocks rose a net 720 tonnes to 117,498 tonnes. They have now risen for three successive days after a run of 35 daily declines.

"The price may consolidate further in the range between $20,300 to $20,900 in the coming sessions before a break happens," LME ring-dealing member Triland Metals said.

Elsewhere, aluminium seesawed either side of the $2,100 level, settling back after hitting $2,113 in Thursday, its best since May 13. Trade at $2,101 was up $8. Inventories fell 5,325 tonnes to 4,385,300 tonnes.

Lead and zinc stocks both rose today by 325 and 625 tonnes respectively. Lead business at $2,029 was down $21 while zinc changed hands at $1,970, a $15 loss. Tin traded at $19,500, down $100, although inventories continue to be whittled away in a tightening market. Stocks fell 50 tonnes to 15,000 tonnes, the lowest since early June last year.

Global steel billet was trading at $480, the highest since May 12. There was a 4,810-tonne jump in stocks to 61,230 tonnes, the highest since the LME introduced futures, although this was a book-keeping operation and marked the exchange incorporating the tonnage of Far Eastern material into the overall total following the merger of the two regional contracts this week.

In the minor metals, cobalt was quoted at a steady $37,500/43,000 per tonne. Stocks fell four tonnes from what were their highest since the February contract launch to 188 tonnes today. Molybdenum was similarly stable at $32,400/34,250.

(Editing by Mark Shaw)

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