LME MORNING - All metals bar copper slip, eurozone woes return to unsettle market

By: Kathleen Retourne

London 03/07/2013 - Base metals other than copper slid into the minus column in Wednesday's premarket on the return of fears about eurozone stability given this week's developments in Greece and Portugal.

In currencies, the euro slipped to a session low of 1.2920 against the dollar, pulling down prices, with sentiment in the eurozone worsening.

Greece must thrash out a deal with its foreign lenders, who are displeased with the apparent lack of progress in reforms to the country's public sector, in the next few days or risk missing out of the next tranche of bailout monies

“Potential events that might bring a quicker-than-expected end to this rebound include developments over Greece and whether they qualify for their next bailout payment,” FastMarkets analyst William Adams said.

And yields on Portugal's 10-year bonds jumped more than 100 basis points to 7.97 percent following the shock resignation of foreign minister Paulo Portas a day after finance minister Vitor Gaspar stepped down - moves that may signal the end of the country's fragile coalition government.

In eurozone data, the Spanish services PMI for June came in as expected at 47.8, while that of Italy disappointed at 45.8 against an expected 47.1. The final services PMI for the region as a whole was 48.3, below the forecast and the previous month's reading of 48.6.

But the region's retail sales for May surprised to the upside at 1.0 percent - they were expected to grow 0.4 percent. The German and French Markit Services PMIs for June both outperformed at 50.5 and 47.2 respectively.

Earlier, China’s non-manufacturing PMI came in at 53.9 against the previous month’s 54.3.

“As with the Chinese official and HSBC manufacturing PMIs, this was the lowest reading since October 2012, when the government decided to enact a $157 billion stimulus plan to encourage growth,” FastMarkets analyst Jono Remington-Hobbs said.

“Given how oversold the markets became in recent weeks, we would not be surprised by further short-covering but, with China looking weak, we would not get too comfortable with the rallies - we expect producer selling will cap them before too long,” Adams also said.  

Markets participants were looking ahead to the June US non-farm employment change on Friday - the health of the labour market is a key indicator of the US economic recovery. Later today, the latest ADP private-sector payroll figures could provide a preview of the official US jobs report.

Analysts expect the US to have added 162,000 jobs last month - a better-than-expected outcome would be bullish for the country's economic outlook but it might also increase the likelihood that the US Federal Reserve will begin tapering its quantitative easing measures later this year.

In addition to the US ADP jobs report, data releases scheduled for Wednesday include June US Challenger job cuts, the May US trade balance, the June US ISM non-manufacturing PMI and weekly US unemployment claims.


COPPER BUCKS TREND BUT FAILS TO GET ABOVE $7,000/T

Copper bucked the overall downward trend - at $6,969 per tonne, it was up $54 on the previous day’s close, having earlier hit a two-week and session high of $6,993.50.

Stocks were up 1,525 tonnes, while cancelled warrants - metal booked for removal and in queues - slipped 475 tonnes to 364,975 tonnes.

“Evidently, some market players have squared short positions in the wake of better economic data of late, pessimism among speculative financial investors having hit an eleven-week high at the beginning of last week. Were this trend to continue, the copper price should find itself well supported,” Commerzbank said in a research note.

The forward spreads have been attracting attention while shorts roll and cover creating tightness. July/August and cash-threes are both showing a backwardation of $5.00.  July-3-months, August/September and July/September are also in backwardations of $14.15, $7.00 and $20.00 respectively.

“[The tightness] took many by surprise but also saw some happy longs lending into the market. It appears that the month of September will be the critical one,” Triland said in a note.

The rest of the complex was in negative territory: aluminium fell $11 to $1,821, with stocks down 8,275 tonnes to 5,436,400 tonnes and cancelled warrants dropping 3,775 tonnes to 2,268,725 tonnes.

Zinc was $11 lower at $1,881 despite a jump in cancelled warrants to 701,000 tonnes, up 19,625 tonnes, with 23,350 tonnes of cancellations in New Orleans. Sister metal lead at $2,074 was $5 lower, with minimal movements in stocks.

Nickel was last at $13,900, down $140, after stocks rose 1,938 tonnes to 190,590 tonnes. Tin at $20,069 was down $156 - stocks and cancelled warrants both declined five tonnes to 14,235 tonnes and 2,680 tonnes respectively.

Steel was indicated at a wide $100/210, with no movement in stocks. In the minor metals, cobalt and molybdenum were neglected.


(Editing by Mark Shaw)

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