LME MORNING - Base metals flat in light volumes, copper tracks euro

By: Kathleen Retourne

London 09/12/2011 - Base metals were flat and business sluggish on the LME on Friday morning while the eurozone debt crisis rumbles on.

Copper is tracking the euro, which is currently at 1.3396 against the dollar. Volumes are light, just fewer than 5,500 lots of the red metal having changed hands by 11:00 London time.

“We have seen an initial sell-off, with a bit of a bounce back but the market really is not going anywhere,” a trader said. "Generally, people are shying away from doing business the last few days and are waiting on further news from Europe."

A treaty with all 27 EU nations failed to get a unanimous agreement, with both Britain and Hungary abstaining and Sweden and the Czech Republic wanting to consult with their parliaments before signing up.

European leaders have added 200 billion euros to the International Monetary Fund (IMF) and scaled back bondholder loss-sharing provisions in a bid to satisfy the European Central Bank.

But the failure to reach a unanimous verdict has led to speculation that a resolution aimed at solving the debt crisis may take longer than expected to materialise, sending the euro to a one-week low and pulling down base metal prices.

“Given the overall economic situation and the scale of what is being asked of EU policymakers, our medium-term view remains bearish. We think the downward trends will dominate but there could well be some counter-trend moves in the short term if the news out of Europe is encouraging,” FastMarkets analyst William Adams said.

China posted a worse-than-expected CPI reading for November at 4.2 percent, below the forecast of 4.6 percent and a sharp drop from 5.5 percent in October. The November PPI reading fell to 2.7 percent against a forecast of 3.3 percent and down from 5.0 percent in October.

Other indicators also pointed to slowing growth in China: industrial production grew by 12.4 percent year-on- year, down from 13.2 percent in October, while fixed asset investment grew by 24.5 percent on a year-to-date basis, backtracking from 24.9 percent in the prior month.

Although the figures show that China’s economy is cooling off more rapidly than anticipated, they also raise expectations that the People’s Bank of China will respond with monetary easing. Many participants foresee another reserve requirement ratio cut before the end of the year.

Trading has been choppy so far this week, reacting to newsflow, but today looks flatter, with prices drifting into the weekend, although there could be a pick-up in activity towards the day’s end.

“There may be some end-of-week activity towards the close tonight but other than that nothing much is really happening,” the trader said.  


COPPER UP, REST OF COMPLEX SLIP

Aluminium dropped $4 on Thursday's close to $2,061 per tonne. In stocks, further trader-owned metal was warranted in Vlissingen, lifting the in LME-listed warehouses to 4,589,050 tonnes, a net increase of 43,000 tonnes. Cancelled warrants at 159,800 tonnes were up 2,525 tonnes.

Copper at $7,751 was up $41, having earlier dropped to a session low of $7,653. The downward trend in stocks is evident again - these fell for a third consecutive day to 386,075 tonnes, a drop of 1,325 tonnes. Cancelled warrants were down 1,825 tonnes at 22,900 tonnes.

Zinc stock movements were less dramatic than Thursday's large increase - total stocks dropped 850 tonnes to 757,350 tonnes today. Cancelled warrants at 27,700 tonnes were down also, dropping 850 tonnes. Business at $1,992.25 dropped $4.25.

Nickel has managed to hold above $18,000, after slumping to $16,550 last week. Prices at $18,229 were still down $71, however. Inventories fell 306 tonnes to 90,042 tonnes and cancelled warrants at 3,458 tonnes, lost 342 tonnes.

Lead inventories fell 1,625 tonnes to 361,700 tonnes, while prices at $2,103 were unchanged on yesterday’s close.

Tin stocks were up 260 tonnes at 12,165 tonnes and cancelled warrants dropped to 1,115 tonnes. Business at $20,100 was down $100.


(Editing by Mark Shaw)

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