LME MORNING - Copper leads metals lower, sloppy sentiment weighs

By: Martin Hayes

London 09/11/2012 - Base metals fell away during Friday LME premarket trading, reversing from intraday highs while a further slippage in the euro and overall uncertain macroeconomic sentiment weighed on the mood.

"The market is ending the week on a dull note," a trader said. "The positive way of looking it at is that each week that passes is one week nearer the recovery. The problem is that there is no real evidence this time that is going to happen easily."

The euro was again buckling, trading around 1.2723 against the dollar, having hit fresh two-month lows of 1.2713. Endemic eurozone travails surrounding Greece and Spain in particular remain a hindrance to sentiment.

As well, there are concerns about the fast-approaching US fiscal cliff - after December 31, spending reductions and the end of tax reductions kick in automatically.

"The market seems to be pinning its hopes on further stimulus measures out of the US, now that the election is over, and China, once the leadership change takes place," broker RBC said.

The Chinese Communist Party's 18th National Congress began yesterday. Meanwhile, in data earlier on Friday, China's CPI for October came in at 1.7 percent, below the forecast of 1.9 percent and the lowest rate of inflation since February 2010. The country's PPI was roughly in line with estimates at -2.8 percent, an increase from -3.6 percent in September.

The week ends with US import prices for October, the US October Preliminary UoM Consumer Sentiment index and Inflation Expectations, and US September wholesale inventories.

For the metals, the session end could see some book-squaring and shorter-term fund covering to protect the downside temporarily.

"You may get the CTAs doing [some covering]. But the bigger funds - the long-term money boys - are short and under no real pressure to buy back," the trader said.


COPPER BACK UNDER $7,600/T, INVENTORIES AT THREE-MONTH HIGH

Today's LME warehouse inventory movements, although to a large part inter-location related as the big financial players continue to shift tonnages around, underlined the depressed nature of industrial-sector fundamentals.

"Leave aside the big cancellations - they are just going from one store to another in the system, not into consumption. The bottom line is that there is a lot of metal around, on and off-warrant," the trader added.

Copper slipped below $7,600 to trade at $7,593 per tonne, a $37 loss from Thursday, with a test of the midweek two-month low of $7,563.25 possible. Inventories rose a net 1,425 tonnes to 246,275 tonnes, the highest since August 2.

Aluminium was $8 lower at $1,917. Stocks climbed 9,425 tonnes to 5,095,775 tonnes, the highest for eight months, due to warrantings of 14,900 tonnes in Vlissingen and 3,000 tonnes in Rotterdam.

Lead broke back below $2,200 to hit $2,188, a $19 loss. Stocks surged 19,225 tonnes to 334,000 tonnes, the highest since late July - 22,300 tonnes were warranted in Johor.

Zinc was $24 lower at $1,905. Stocks were down 2,075 tonnes at 1,161,000 tonnes, while cancelled warrants - the metal booked for removal - jumped 5.5 percent to a new all-time peak of 504,900 tonnes. A 26,900-tonne cancellation was seen in Antwerp, taking totalled cancelled warrants there to 56,900 tonnes.

Nickel eased to $16,111 from yesterday's $16,160 - stocks fell, however, dropping 528 tonnes to 130,236 tonnes. Tin dropped $200 to $20,300, with stocks falling 25 tonnes to 11,680 tonnes.

Steel billet was little-changed at $335/345, with inventories down again, dropping 1,950 tonnes to 95,485 tonnes. Cobalt and molybdenum were neglected.


(Editing by Mark Shaw)

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