LME MORNING - Metals mostly retreat, bears take control ahead of US jobs report

By: Martin Hayes

London 04/05/2012 - Base metals largely retreated during Friday's premarket trading, with copper, lead and tin all falling to one-week lows - a tentative early rally was snuffed out by negative macroeconomic sentiment.  

"The market has turned lower this week - [economic] numbers have not been good and it is no surprise that we are down again," a trader said.

Conditions were erratic and patch, and volumes were skimpy while the market awaited the early-afternoon US April employment report, the week's key data event. In other markets, equities were soggy and the euro was slack against the dollar at around 1.3130 following poor eurozone PMI data.

The market remains on the defensive following a two-day sell-off, with nervousness evident over the US employment figures.

"The... non-farm payrolls number will be key in helping markets determine the next move," broker RBC said.

US employers are seen adding 173,000 jobs last month, while the jobless rate is expected to hold at 8.2 percent. Other US employment data this week - ADP figures, Challenger job cuts and weekly jobless claims - have been mixed, adding to uncertainty.

"Last month’s disappointing rise of only 120,000 jobs has left the market nervous for [today's] number," RBC added.

The mood in the complex has deteriorated this week. A run of US figures have showed patchy economic activity, while the eurozone economies are stagnant or heading towards recession.

Traders expect uneasy trading up to the early-afternoon release of the non-farm payrolls data, after which movements are likely to be volatile given that there will be a holiday weekend in the UK, with the LME closed on Monday.

The recent rebounds have now run out of momentum and prices are pulling back, analyst William Adams of FastMarkets noted.

"Our overall view is that demand is weak and, with the exception of copper and tin, the supply surpluses should weigh on prices, especially while economic growth seems to be struggling, even though we are in the seasonally strong second quarter," he said.


Copper, which has initially advanced, briefly dropped to $8,195 and then settled at $8,210 per tonne, a $19 decline from the Thursday close. But inventories fell for the 11th day in a row - down a net 4,575 tonnes at 230,625 tonnes, the lowest since late October 2008.

In the nearby spreads, 'TOM/next' (tomorrow/next day) ranged from $4.50 to $12.00 backwardation against $1.00 contango on Thursday, having been as high as $24 two days ago.

Aluminium dropped back to $2,082, an $8.50 loss, although stocks fell below five million tonnes. The net 14,125-tonne drop brought the total down to 4,990,075 tonnes, the lowest for three months.

In other metals, lead fell to 42,075 at one stage then held at $2,080, a $12 loss. Stocks dropped 1,900 tonnes to 358,425 tonnes, a three-month low as well. Zinc, although off highs above $2,000, was $9 up from the soft Thursday close at $1,993.

Nickel business at $17,481 was up from a previous $17,275 as the market clawed up from Thursday's one-month lows, although inventories were up 516 tonnes. Tin traded at $21,774, down from yesterday's $21,805.

Steel billet was indicated $19 lower at $480/495, with a 65-tonne inventory increase seen. Cobalt was quoted at $30,000/31,250 and molybdenum at $30,000/31,150.

(Editing by Mark Shaw)