LME MORNING - Metals struggle as technicals stall, European data underwhelms

By: Martin Hayes

London 30/04/2013 - Base metals broadly fell back during low-key LME premarket trading on Tuesday, lacking follow-through to the previous day's technical gains and stymied by a run of mostly soft European economic data.

Among these and ahead of Wednesday's widespread European May Day closures, the eurozone jobless rate held at 12.1 percent, the April CPI rose a less-than-expected 1.2 percent and German unemployment rose by 4,000 last month, double the expectation.

Metal prices look set to range broadly ahead of potential end-week macro-economic developments from US and European monetary policy meetings. Slow conditions reflected market closures in Asia ahead of Wednesday's holidays, traders said.

"For some days now, the majority of metal prices have been trading sideways. We believe that the consolidation process will continue for a number of weeks yet," broker Commerzbank said.

The three-day holiday in top consumer China has kept many key players out of the market, while May 1 is a public holiday in most other financial centres, with the exception of the UK and the US. This puts the emphasis on end-week macro-economic developments.

On May 1, the US FOMC could make a fresh commitment to maintain the central bank's bond-buying programme in the wake of disappointing US economic indicators. The US Fed has said it remains committed to with its third quantitative easing (QE3) programme until the labour market had improved substantially.

On Thursday, the ECB is widely seen cutting its main interest rate at its monthly policy meeting, similarly in response to recent weak data. A rate cut of 25 basis points would take the ECB's refinancing rate to a record low of 0.5 percent.

"We don’t expect much in the line of big moves over the next few days as option expiry is coming [on Wednesday] and most of the metals are trading pretty close to the strike levels that have the largest open interest," broker RBC said.

May traded options will be declared tomorrow morning but the more sizeable open interest is located in June.

Later in the session, US releases include the March employment cost index, the February S&P/CS Composite-20 HPI, the April Chicago PMI and the April CB consumer confidence index.


Copper was showing signs of falling back below the $7,100 level, trading at $7,115 per tonne, down from the $7,153.50 Monday close. Inventories rose a net 950 tonnes to 618,600 tonnes, just 3,000 tonnes under the 10-and-a-half year highs set earlier this month.

"Copper will likely trade either side of $7,000 for the next few days and see good resistance at $7,200 unless something happens in the supply chain," RBC added.

Aluminium was unable to hold above $1,900, slipping to $1,894, a $5 loss. But stocks fell 10,100 tonnes to a two-month low of 5,157,625 tonnes.

In others, lead traded at an unchanged $2,039, down $5 - inventories dropped for the sixth day in a row, with the 1,525-tonne fall taking the total down to 255,175 tonnes, a new low since October 2012. Cancelled warrants - metal booked for removal - rose eight percent or 11,900 tonnes to 161,350 tonnes, the highest since January 16.

Sister metal zinc was $12 lower at $1,897 although inventories were down for the 12th successive day - falling 6,400 tonnes to a six-month low of 1,068,475 tonnes.

Nickel was $95 lower at $15,405, while a 1,200-tonne lift in inventories took the total to a new all-time high of 177,036 tonnes. Tin traded at $20,801, a $94 loss, with stocks up 120 tonnes at 14,055 tonnes.

Steel billet was neglected and stocks were static at 77,480 tonnes. In the minors, cobalt was indicated at $26,500/28,000, with stocks up three tonnes at 429 tonnes. Molybdenum was ignored.

(Editing by Mark Shaw)