LME MORNING - Metals range amid steady undertone, eye EU debt developments

By: Martin Hayes

London 05/12/2011 - Base metals ranged narrowly around pre-weekend levels during Monday LME premarket trading, with sentiment fixed on developments in the wider markets and the European political arena, which continue to influence movements, traders said.

"The markets seem to be looking at it fairly optimistically - the euro is holding up well," a trader said.

European shares were some 0.5 percent higher, while the euro was edging up against the dollar and stood around 1.3450.

"This week is set up to be all-important for the EU crisis and, after concerted action by central banks last week, the market may well hope that policymakers will be able to get their act together, which may underpin sentiment and lead to some further price gains," William Adams of FastMarkets said.

This week European developments will continue to influence financial market trends. On Sunday, Italian Prime Minister Mario Monti introduced a 30-billion-euro package of austerity measures, while today French President Nicolas Sarkozy and German Chancellor Angela Merkel meet to outline joint proposals for more coercive budget discipline in the eurozone ahead of a full EU summit on Friday.

Before that, US Treasury secretary Timothy Geithner visits Germany, where he will meet ECB president Mario Draghi and government officials.

Underlying sentiment has picked up since the middle of last week when financial markets were galvanised by global central banks adding liquidity in a concerted move to tackle fears of a lending crunch.

This was augmented by the key US November employment report, which showed the jobless rate at a two-and-a-half-year low - it fell to 8.6 percent from the rate of nine percent at which it has stood for some time.

But there are concerns about China, given that the country’s manufacturing PMI showed a modest drop in November from the previous month.

In the short term, uncertain and volatile trading is expected, with prices reacting to diverse influences - news developments, end-of-year and December date pricing considerations and the data flow.

Releases due late today include the November ISM Non-Manufacturing PMI and October factory orders.


Copper was trading at $7,892 per tonne, down just $3 from Friday's close, while warehouse inventories rose for the third day in a row. Stocks were up a net 1,350 tonnes at 389,500 tonnes.

Aluminium traded at $2,111, down $19, looking to avoid a test of sub-$2,100 levels. Stocks fell 4,900 tonnes to 4,550,075 tonnes.

Lead business at $2,110 was up $5 after inventories fell 450 tonnes to 366,375 tonnes, the lowest since late September. Cancelled warrants edged up slightly to a record high of 46,900 tonnes.

Zinc traded at $2,035, down $17, with stocks climbing 825 tonnes from what had been eight-month lows to 738,075 tonnes. Tin touched $19,725, a fresh two-month low, and then held at $20,000, up $50 - stocks rose 10 tonnes to 12,165 tonnes.

Nickel traded at $18,000, up $260, while inventories dropped 366 tonnes to 90,456 tonnes. Steel billet was steady at $532/545 but stocks rose 195 tonnes to 68,640 tonnes, a fresh 14-month high. The minors were neglected.

(Editing by Mark Shaw)