LME MORNING - Metals retreat from overnight peaks, well supported on cheery macro sentiment

London, 08 July 2010 - Base metals, which peeled back from overnight peaks on Thursday, remained underpinned by wider economic optimism, which rose again after a growth upgrade by the International Monetary fund and a robust profit forecast by a major US bank.

Continuing strength in the euro and steadier equity markets also added support.

Copper and aluminium conquered key resistance levels - copper poked through the $6,700 per tonne level in Asian hours before subsiding towards parity while aluminium briefly broke above $2,000. In copper, volumes were moderate with around 4,000 lots changing hands on Select.

Some positive signs ahead of the US quarterly results season encouraged a more favourable view of risky assets such as key commodities, backed up by tightening fundamentals in contracts such as copper, where inventories continue to dwindle.

The Washington-based IMF raised its 2010 world growth forecast to 4.5 percent from 4.1 percent. It lifted its US growth forecast to 3.3 percent from to 2.7 percent, while leaving its outlook for European nations unchanged at 1 percent. But the picture was not uniformly positive - it also warned of significant downside risks flowing from Europe.

Meanwhile, the US earnings season looks set for a positive start after US custody bank State Street Corp said it expects second-quarter adjusted earnings of 97 cents per share, surpassing analyst expectations of profit of 72 cents per share.

European stocks built on a strong US session, up between half and one percent, with some caution ahead of European monetary meetings later today. Early this afternoon, the Bank of England's monthly monetary policy meeting ends and it is almost certain to leave interest rates at 0.5 percent. At a meeting of the European Central Bank, interest rates are seen remaining unchanged as well.

The regular US weekly jobless report will set the tone for the afternoon ahead of a data-heavy programme from China, traders said.

In other financial markets, the euro surged to its best for around two months to some 1.2688 against the dollar before settling at 1.26560.

Preliminary Chinese trade data figures for June are due on Saturday, followed by a series of releases next week.


In the metals, prices settled back from the peaks reached in Asian hours. The market's short-term mood is variable at present - swings higher over recent sessions have been sold into.

The daily warehouse inventory report, which showed a resumption in stock falls in aluminium and tin as well as the regular declines in copper and nickel, provided background support.

Aluminium traded at $1,994, up $9 from the previous close but below one-week highs hit initially above $2,000. Stocks, which surprisingly rose yesterday, resumed their normal downtrend by falling a net 5,675 tonnes to 4,403,875 tonnes, the lowest since June 10 last year.

Copper, which likewise traded at its best for a week earlier at $6,725, changed hands at $6,650, still up $10. Inventories fell for the 15th day in a row - down 350 tonnes at 439,000 tonnes, a fresh low since November 30, 2009.

Nickel business at $19,289 was up $89 after inventories fell for the 22nd successive day - down 390 tonnes at 121,326 tonnes, a fresh low since early October 2009.

Lead outperformed zinc - the former was some $31.75 higher on the day at $1,826.75 while zinc was mired for a second day around the $1,850 mark, up $6at $1,856. Inventories of lead fell a net 500 tonnes today, reversing yesterday's movement, while zinc stocks rose 250 tonnes, with no trend apparent here.

Tin traded at $17,550, down $100. Stocks, however, fell 215 tonnes to 16,605 tonnes, the lowest since mid-June 2009. Med billet stocks rose a net 390 tonnes and prices were indicated $10 lower at $415/430 per tonne.

Cobalt inventories rose again, with 10 tonnes unusually delivered into Singapore, bringing LME stocks to 167 tonnes, most of which is housed in Rotterdam.

Cobalt was indicated at $37,400/43,000 from $37,500/$37,800 on Wednesday when it traded at $37,500, while molybdenum was quoted at $27,500/32,000 down from $31,000/33,000 in the prior session.

(Additional reporting by Martin Hayes. Editing by Mark Shaw)