LME MORNING - Prices drift aimlessly, rangebound while US govt impasse goes on

By: Martin Hayes

London 04/10/2013 - Base metals trading was lacklustre during Friday's LME premarket, with prices wandering either side of previous closing levels, maintaining the recent pattern, which reflected the continued impasse over the US government's shutdown.

As well, China’s absence for “Golden Week” and the onset of the annual LME Week, which starts on Monday, also weighed heavily on liquidity.

"We're doing very little - nobody is getting too excited today, and most people will hold off until next week," a trader said.

Currency factors provided a downside cushion to some extent, with the euro last trading around 1.3615 against the dollar - on Thursday it hit an eight-month high of 1.3646.

The US government has been in stalemate after it failed to agree a 2013/2014 budget, resulting in a shutdown in all non-essential government services.

"Given the potential headwind that the US debt crisis is creating, we are not surprised that the metals are not feeling bullish - if the situation deteriorates, prices could come under pressure but for now we expect further consolidation,” FastMarkets analyst William Adams said.

Business is likely to remain choppy in thin conditions, with little to drive the market. US non-farm payrolls, which are considered the most important monthly data release in financial markets, are unlikely to be issued as scheduled early this afternoon.

“The US government shutdown is negative for the asset class due to the potential impact on growth. However, the shutdown may further delay Fed tapering. For now, we think choppy sideways trading is the most likely outcome,” broker Credit Suisse said.

Such data as there has been has been soft - yesterday, the ISM non-manufacturing PMI fell to 54.4 in September, a three-month low, and below the forecast drop to 57.2. The markets have taken a weaker-than-expected number as reinforcing the case for the Federal Reserve to hold its hand on QE unwinding.

In the metals, copper prices again huddled near $7,200, trading recently at $7,197 per tonne, up $8 from Thursday. Warehouse stocks fell for the 22nd successive day, with a net 4,025-tonne fall to 525,925 tonnes, the lowest since mid-March.

Aluminium was $7 lower at $1,820 again struggling to move away from $1,800 - stocks were down 5,650 tonnes at 5,360,475 tonnes.

In others, zinc was $3 higher at $1,871, with stocks down 1,650 tonnes at 1,013,025 tonnes. Lead business at $2,060 was unchanged, while stocks dropped 500 tonnes to 237,800 tonnes.

Nickel business at $13,612 was up from a previous $13,525, but the 564-tonne stock increase lifted the total to a new all-time high of 227,562 tonnes. Tin was trading at $22,871, up $21, while stocks rose 25 tonnes at $13,195 tonnes.

Steel billet was neglected, while stocks held at 26,845 tonnes. Cobalt and molybdenum were indicated at $26,250/28,000 and $20,250/20,800 respectively - stocks in the former dropped five tonnes to 529 tonnes, the lowest since August 28.

 (Additional reporting by Kathleen Retourne, editing by Mark Shaw)