London 25/06/2013 - Base metals mostly eked out relatively modest gains during Tuesday LME premarket trading amid snap technical covering in the wake of yesterday's sharp sell-off, with prices recovering from initial fresh lows today, traders said.
Initially, copper, nickel and lead again set long-term lows in Asia, with copper at a three-year low, nickel at a four-year low and lead at a one-month low. Aluminium flirted with four-year lows as well.
"It is not a surprise - once the selling had been tempted out in Asia, there was some profit-taking here, and that got some of the shorts flushed out," a trader said.
As well, an upturn in equities and a pullback in the firm dollar provided a supportive short-term backdrop. The dollar, at 1.3056 against the euro at one stage on Monday, a three-week high, was last at some 1.3135.
But advances in the metals complex were tinged with caution - prices remain vulnerable on the downside from challenging macroeconomic fundamentals.
"Concerns over credit market conditions in China, rising US bond yields and the uncertain economic outlook are triggering the current wave of selling," broker Credit Suisse said. "In the next few days, the commodity specific data calendar is rather thin, so prices may find it difficult to stabilise in the absence of fresh impetus."
China has toughened its stance on credit operations, undermining the stock market there and casting doubts over the pace of economic growth and expansion. The central bank has engineered a tightening of cash in money markets as it tries to rein in excessive credit growth, especially in the lightly regulated "shadow banking" sector.
On the data side today, figures are mainly centred on the US, which will provide some guidelines on the likelihood of the Federal Reserve following through on its plans to taper its third quantitative easing programme.
Of particular focus today will by the Conference Board Consumer Confidence reading, forecast at 75.2, as well as May durable goods orders and May new homes sales, which are expected to improve to a pace of 462,000 units from 454,000 last time.
This could spark bouts of two-way price volatility later, when US investment interests are in play.
"These markets are being whipped around now - we saw it on Thursday, Friday and yesterday. The CTAs and the systems players are very active on a short-term basis and that's likely to go on," the trader added.
COPPER INVENTORY INCREASE STEMMED
Copper was trading at $6,763 per tonne, consolidating below session highs and up $97 from Monday. The market rallied stoutly from the early three-year low of $6,602 set in Asia after inventories ended a seven-day run of increases, falling 3,375 tonnes from what were 10-year highs to 674,850 tonnes.
Cancelled warrants - metal booked for removal and in queues - jumped to an all-time high of 338,250 tonnes as well.
Aluminium was checked after bouncing from $1,765.50, trading at $1,783, up $12 still. Stocks rose 4,950 tonnes to a new all-time high of 5,445,275 tonnes, with 11,325 tonnes warranted in Vlissingen. Cancelled warrants rose to 2,201,800 tonnes, a six-month high.
Nickel traded at $13,850, up $220, having touched $13,525 earlier. Stocks fell 114 tonnes to 186,084 tonnes from what were record highs. Cancelled warrants increased to 31,230 tonnes.
Zinc business at $1,836 was $11 higher but inventories rose, ending a run of 11 successive daily declines. Stocks were up 2,550 tonnes at 1,068,400 tonnes - there was an 8,200-tonne warranting in Antwerp.
Lead traded at $2,014, up $19 from yesterday, having been as low as $1,986 earlier. Stocks were down 1,675 tonnes at 194,200 tonnes.
Tin rose $225 to $19,800, with stocks dropping 50 tonnes to a three-week low of 14,140 tonnes. Steel billet was neglected but inventories fell for the fifth day in a row - down 455 tonnes at a six-month low of 74,880 tonnes.
In the minors, cobalt was indicated at $28,500/32,000, while molybdenum was unquoted.
(Additional reporting by Eddie van der Walt, editing by Mark Shaw)