LME MORNING - Metals easier, China's slowing GDP puts skids on sentiment

By: Martin Hayes

London 13/04/2012 - Base metals fell across the board during Friday LME premarket trading, undermined by a downturn in equity markets and a softer euro against the wider background of the earlier Chinese first-quarter GDP figures, which came in below expectations.

"It is, to some extent, a currency thing, as the euro has come off its highs as we move through the morning," a trader said.

The euro, which had been above 1.32 against the dollar at one stage, slithered back to around 1.3150 recently.

"Also, we do appear to be back on the defensive anyway - last night's closes were a bit soft, and that has caught out some of the longs," the trader added.

In a flurry of Chinese economic releases, figures released on industrial production and retail sales were more promising and the GDP outturn suggested that monetary easing is more likely.

In the data, China's first-quarter GDP growth rate came in at 8.1 percent, below the forecast of 8.4 percent and compared with 8.9 percent growth in Q4 2011. By contrast, March industrial production rose 11.9 percent against the forecast 11.5 percent.

But overall macroeconomic sentiment remains on the defensive, given that most-recent US data on employment - last week's March payrolls report and Thursday's weekly unemployment claims - have been below par, suggesting that the recovery there is stuttering.

Similarly, eurozone sovereign debt contagion fears are being cranked up, with concerns over Spain and Italy coming to the fore.

Business for the rest of the session may well see some end-week covering and booksquaring ahead of next Monday's 'third Wednesday' pricing against the April date.

As well, there are data releases and events from the US this afternoon - the March CPI and the April Preliminary UoM Consumer Sentiment index, while Federal Reserve Chairman Ben Bernanke is scheduled to give a speech in New York City.


COPPER VULNERABLE TO A TEST OF $8,000

Copper swung below the $8,100 level once more - it recently traded at $8,090 per tonne, down 1.6 percent or $130 from the previous close. The market is now in danger of testing the more-critical $8,000 level. Warehouse stocks, meanwhile, fell a net 1,675 tonnes to 264,400 tonnes.

"We still think the stops lurking below $8,000 may be too much for the bears to leave behind, so expect in the coming week to see another test lower," broker RBC said.

In the ever-tightening April/May spread, the backwardation was indicated at $38, while the cash/threes premium was $44/48.

Aluminium slid below $2,100 to $2,091, a $13 decline. Inventories fell 7,175 tonnes to 5,052,700 tonnes. Outflows were seen from the usual locations - Detroit, Johor and Vlissingen - although only the latter, with 3,000 tonnes shipped out, was significant.

In other metals, zinc fell to $2,012, a $28 loss, with stocks climbing 2,350 tonnes to 902,675 tonnes, a fresh high since May 1995. Lead eased to $2,072, a $26 loss - inventories, however, dropped 950 tonnes to 372,600 tonnes.

Nickel traded at $18,470, down from a previous $18,800 - a 54-tonne stock decline was seen. Tin at $22,450 was $205 lower, with stocks climbing 40 tonnes to 13,265 tonnes.

Steel was stable at $505/520 - inventories were unchanged at 19-month lows 30,160 tonnes as a 22-day run of decreases was halted. In the minors, cobalt and molybdenum were both indicated at $30,500/32,000.


(Editing by Mark Shaw)

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