LME MORNING - Base metals up on Obama victory, focus turns to Greece

By: Kathleen Retourne

London 07/11/2012 - Base metals rose across the board in Wednesday morning LME trading, bolstered by news that Barack Obama had won a second term as president of the US.

But after an initial jump, the complex has pared gains on concerns about Greece's bailout.

“The market rationale behind the rise in risk sentiment is that an Obama victory would keep Ben Bernanke as chair of the Federal Reserve and, with that, a continuation of its current ultra-loose monetary policy,” FastMarkets analyst James Moore said.

Attention will now turn to the fiscal cliff and a raising of the debt ceiling. The fiscal cliff - the point at which a series of tax increases and government spending cuts are set to come into force automatically next year - is the first major obstacle for Obama's government to negotiate.

The risk is that these changes will strip $607 billion from US GDP, potentially sending its economy into recession.

“This could quickly take the wind out of the sails of the current positive mood again. That said, the green light has been given for further price rises in the short term, so long as the Greek parliament does not upset the apple cart when it votes on the latest round of austerity measures later today,” Commerzbank said.

The dollar edged lower against the euro after Obama's re-election - it was last at 1.2861, near intraday lows - on the expectation that QE will continue, which is bearish for the US currency.

Still, the euro may come under pressure while Greek workers carry out a 48-hour general strike in protest against a proposed package of 13.5 billion euros of cuts that goes before parliament today. An agreement is necessary to secure its ECB bailout terms.

In data, eurozone retail sales came in below the expected 0.0 percent at -0.2 percent.

For the metals, today is the start of declarations of November traded options, which will run for a week.


METALS PARE GAINS BUT STILL IN POSITIVE TERRITORY

Copper at $7,747 per tonne was up $47 on the previous day’s close but down from its earlier high of $7,806.25. In nearby spreads, 'TOM/Next' (tomorrow/next day) was last at $0.25/1.00 back, while Nov/Dec was in a slight contango of $3.25.

Stocks were down a net 1,825 tonnes at 245,575 tonnes and cancelled warrants at 34,325 tonnes slipped 1,425 tonnes.

Aluminium at $1,944 was up $24, while inventories at 5,084,425 tonnes dropped 6,250 tonnes and cancelled warrants fell 8,950 tonnes to 1,686,175 tonnes.

Lead at was back above $2,200 at $2,205.50, a rise of $40.50 or almost two percent. The nearby spreads remain tight - TOM/Next widened to $14/20 backwardation. Stocks fell 1,075 tonnes to 317,450 tonnes.

 Zinc business at $1,920 was $22 higher. Cancelled warrants jumped 86,525 tonnes this morning due to large cancellations in New Orleans to 389,350 tonnes, with total cancelled warrants at 452,075 tonnes, a record high. Inventories fell 1,725 tonnes to 1,166,650 tonnes.

Nickel peaked at $16,434 before settling at $16,325, still up $250. Inventories fell 48 tonnes to 130,500 tonnes while cancelled warrants rose 756 tonnes to 13,758 tonnes. Tin at $20,700 was up $75 - stocks were unchanged at 11,705 tonnes while cancelled warrants at 5,185 tonnes were up 400 tonnes.

Steel was unchanged at $335/350 after stocks dropped 1,170 tonnes to 98,995 tonnes. The drawdown from Antwerp continued - stocks there now stand at 76,980 tonnes. In the minor metals, cobalt was offered at $27,500 after stocks rose 24 tonnes to 427 tonnes but molybdenum was neglected.


(Editing by Mark Shaw)

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