LME MORNING - Base metals slip as softer euro and Chinese growth concerns weigh

By: Kathleen Retourne

London 15/07/2013 -  Base metals were rangebound during Monday morning LME pre-market trading, with Chinese data looking likely to have already been priced in. Still, many metals were slightly lower in negative territory as the euro lost ground against the dollar.  

"Overall we would say the metals now have the opportunity to rally, but if they do not take it then that will signal that traders feel in no need to chase prices higher, which given the slower than expected growth in China would not be surprising," said FastMarket analyst William Adams.

"The question will then be whether prices remain rangebound, or start to head lower gain. Overall we feel there is little to be bullish about, other than for a short-covering rally.

China’s second-quarter GDP grew by 7.5 percent against the same three-month period a year ago, below the 7.7 percent forecast by analysts, while June industrial production at 8.9 percent growth also missed expectations.

Yet the GDP reading comes on the heels of a comment from Chinese Premier Li Keqiang on Friday noting that annual growth for 2013 should not fall below the official target of 7.5 percent, even as its prioritises rebalancing the economy towards a greater reliance on domestic consumption, so the second-quarter result may be somewhat reassuring for the market.

Other data results from China this morning were mixed. June retail sales figures came in above expectations at 13.3 percent, but June fixed asset investment on a year-to-date-on-year basis failed to meet the forecast of analysts.

"Market participants had evidently anticipated weaker economic data from China, with the result that a certain degree of relief was palpable," said Commerzbank. "Nonetheless, the Chinese economy did grow more slowly for the second consecutive quarter, which appears consistent with the new government policy of placing greater emphasis on sustainability and tolerating less economic dynamism."

"At the end of last week, the Chinese finance minister had announced that economic growth of 6.5 percent would pose no ‘big problem’. It remains to be seen how this will affect demand for metals."

In currencies, the euro was last at 1.3032 against the dollar, paring back some of its gains from the previous week.

Investors continued to find optimism in the comments from Fed FOMC members in the latest policy meeting minutes pointing towards a longer duration of monetary stimulus measures. The market will be looking for further confirmation of this policy at Fed Chairman Ben Bernanke's semi-annual testimony 'Beige Book' before Congress that begins Wednesday.

“Mid-week, all eyes will then be on Chairman Bernanke’s appearance before Congress for his testimony,” said Credit Suisse. “While we retain our broadly bullish dollar view versus most G10 currencies over three months, we think consolidation is more likely in coming weeks, unless Bernanke were to suddenly turn hawkish.”

METALS DRIFT LOWER 

Copper at $6,911 per tonne was down $43 on the previous day’s close. Meanwhile warehouse stocks were down for the seventh consecutive day, losing a net 2,925 tonnes to 637,850 tonnes. Cancelled warrants were also lower - at 333,375 tonnes they were down 3,575 tonnes.

This week will see the July date become prompt, and spreads could see some choppiness ahead of "Third Wednesday". At present, much of the forward curve is in contango, although Sept-3 months is showing a backwardation of $2.00.

Aluminium was down $5 at $1,826 with a 1,375-tonne inventory decline to 5,410,050 tonnes. Cancelled warrants at 2,208,100 tonnes dropped 6,375 tonnes.  

Lead at $2,062 fell $10, while stock movements were minimal, inventories were up 125 tonnes and cancelled warrants at 108,000 tonnes lost 175 tonnes. Sister metal zinc was last at $1,890 a $13 decline. Both stocks and cancelled warrants were down 5,850 tonnes at 1,002,650 tonnes and 660,050 tonnes respectively.

Nickel at $13,693 posted a $82 loss as stocks were up 1,902 tonnes to 196,308 tonnes - a fresh all-time high. Adding to pressure was a downturn in cancelled warrants, falling 492 tonnes to 27,408 tonnes.

Tin at $19,450 was down $100 with no change in stocks, but a 55-tonne rise in cancelled warrants to 5,340 tonnes was seen.

Steel was indicated at $100/200 while in minor metals, both cobalt and molybdenum were neglected.

(Editing by Martin Hayes)

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