LME MORNING - Base metals build on gains, copper at fresh 2-mth high

By: Kathleen Retourne

London 13/08/2013 - Base metals continued to build on the previous week’s gains in Tuesday’s premarket despite a relatively slow start from Asia.

Markets gained ground after the release of better-than-expected numbers out of China late last week and this, coupled with short-covering, has sustained a rally in the past few sessions although some market observers have warned that the lack of technical momentum could limit the upside in the coming days.

Data from the eurozone this morning was mixed but with a positive bias. German final CPI for July at 0.5 percent was as expected, although the WPI at -0.3 percent missed the forecast 0.2 percent, and ZEW economic sentiment for August surprised to the upside at 42.0

For the EU as a whole, ZEW economic sentiment for August was positive at 44.0, beating the forecast 37.4, but industrial production for June at 0.7 percent was below the predicted 1.1 percent but up from the previous month’s -0.3 percent.

July US retail sales figures are due later - these are expected to have risen, which may provide some clarity on whether the US Federal Reserve might start to taper its programme of stimulus measures. The recent run of largely positive data out of the country suggests the central bank may begin to unwind quantitative easing as soon as next month.

For now, a more settled ranging pattern may develop while the slow summer period continues but the short-term bias is more positive as long as the wider macro-economic backdrop remains supportive.

In other markets the strong euro settled back slightly against the dollar this morning at around 1.3310.

In the metals, copper at $7,354.75 per tonne was up $103.75 on the previous day’s close and its strongest in two months. Inventories fell a net 3,225 tonnes to 589,725 tonnes, a four-month low. Cancelled warrants at 314,250 were up 2,350 tonnes.

Aluminium was $17 higher at $1,897 after inventories fell 1,250 tonnes to 5,458,550 tonnes.

“Besides the data from China, fundamental aspects have also been lending buoyancy to the aluminium price,” Commerzbank said in a note. “[UC Rusal] has called upon the Russian government to consider building up state aluminium reserves. In so doing, the government would help Rusal to support global aluminium prices.”

Lead at $2,200 was $11 higher. Stocks and cancelled warrants were both down 1,050 tonnes at 197,675 tonnes and 103,375 tonnes respectively.

Zinc gained $16 to $1,962, its highest since June 6, after stocks and cancelled warrants both declined 3,675 tonnes to 1,045,125 tonnes and 607,375 tonnes respectively.

Nickel at $14,920 was $200 higher; stocks climbed 1,950 tonnes to 205,890 tonnes. Tin at $22,100 was unchanged although stocks rose 455 tonnes to 14,205 tonnes.

Steel was indicated at $150/198 while in the minor metals both cobalt and molybdenum were neglected.

(Additional reporting by Martin Hayes, editing by Mark Shaw)