LME MORNING - Base metals relief rally falters on poor Chinese data

By: Kathleen Retourne

London 02/07/2012 - Base metals mostly stepped back from Friday's highs in premarket trading on Monday after poor Chinese data over the weekend put the brakes on the relief rally.

The complex took flight on Friday when the euro strengthened on positive statements out of the EU summit but Chinese data on Sunday came in below expectations and dampened sentiment. The single currency is currently at 1.2634 against the dollar

"I would view current strength as selling opportunity," a trader said. "Nothing has changed fundamentally - the same fears and concerns that have been prevalent for weeks and months are still here. Weak shorts are being stopped out, the traditionally slow summer months are upon us prompting slowing usage and [there is] weaker demand."

June's purchasing manufacturing in China dropped to 50.2 from 50.4 the previous month due to falling orders. HSBC final manufacturing PMI at 48.2 was down from the expected 48.1.

While the data undershot, market participants hope that the poor figures would lead to further monetary easing measures from the country, which would cap the downside in metals.

In other data, the EU final manufacturing PMI for June at 45.1 beat the expected 44.8. Within this, German data was down at 45.0 against an expected 45.2, while France beat expectations of 44.7 at 45.2.  Italian monthly unemployment rate also beat forecasts at 10.1 percent, below the expected 10.4 percent.

Later today the US will release its final manufacturing PMI, ISM manufacturing PMI, construction spending and ISM manufacturing prices.

And later this week, focus will turn to Thursday's ECB meeting, with expectations of a rate cut building, and Friday's non-farm payrolls.


Copper at $7,640 per tonne was down $50 on Friday's close. The metal dropped on poor Chinese data and the closing of positions after Friday's relief rally. Inventories reversed their seven-day increase, dropping a net 850 tonnes to 256,300 tonnes, while cancelled warrants at 26,600 tonnes were down 1,200 tonnes.

"We also saw Shanghai copper inventories increasing 1.7 percent to 139,000 tonnes as of June 28 - further evidence that the Chinese have been active in the physical market taking advantage of the recently opened LME/Shanghai price differential," ANZ Research said.

Aluminium at $1,904 fell $6. Stocks fell 11,275 tonnes to 4,822,650 tonnes, with drawdowns in Detroit and Vlissingen, while cancelled warrants at 1,782,650 tonnes were up 6,525 tonnes.

Zinc was down $7.50 at $1,872.50. Inventories climbed 2,650 tonnes due to a 2,475-tonne jump in New Orleans, where 683,475 tonnes are now held, of which 83,025 tonnes are cancelled warrants.

Total zinc cancelled warrants in the LME system rose 3,275 tonnes to 159,900 tonnes, the bulk of which was due to New Orleans and Port Klang, Malaysia.

Lead at $1,866 was up $5 after stocks fell 575 tonnes to 349,725 tonnes and cancelled warrants at 52,525 tonnes were down 1,075 tonnes.

Nickel at $16,707 was down $23. Inventories at 103,350 tonnes were up 498 tonnes; of this total, 8,316 tonnes are cancelled warrants.

Tin is trading at the top of today's trading range, up $150 at $18,925. Stocks edged 90 tonnes higher to 12,170 tonnes but cancelled warrants slipped 80 tonnes to 2,310 tonnes.

Steel was offered at $410, with stocks unchanged at 28,145 tonnes. In the minor metals, cobalt was indicated at $29,000/30,400 and molybdenum was neglected.

(Editing by Mark Shaw)