London 14/10/2011 - Base metals advanced in premarket trading on Friday morning, reversing the previous session's losses on hopes that Brazil, Russia, India and China might contribute to the IMF fund to bail out distressed European economies.
Ahead of this weekend's G20 meeting, the governments of the so-called BRIC countries are looking at ways to boost funds to combat the eurozone sovereign debt crisis, the Financial Times reported, which boosted market confidence slightly this morning.
“Metal prices are pausing around post-rebound highs and pressure seems to be building to push higher,” FastMarkets analyst William Adams said. “Copper and lead seem in pole position - if they go, the others are likely to follow."
European shares were also perkier, rising despite news that Ratings agency Standard and Poor's downgraded the long-term credit rating of Spain by one notch to AA- from AA with a negative outlook, based on deteriorating growth prospects.
The FTSE 100, Dax and CAC 40 were all up around one percent around 11:40 London time.
"European markets have opened positively today, and all eyes will be on the beginning of the G20 summit," a trader said. "Markets seem hopeful of further reassurances that world leaders are getting to grips with the Eurozone debt crisis."
Credit agency Fitch Ratings has downgraded Swiss bank UBS, while placing several US and European banks on credit watch negative.
Still, commodities and other high-risk assets are generally set to remain under pressure while European policymakers still scramble to come up with a viable plan to contain the sovereign debt crisis.
“If they have not come up with a solution over the past 18 months, then it might be expecting a lot to find one in three weeks,” Adams said. “What is more, if they do come up with a real solution that gets to the root of the problem, then that is likely to inflict considerable pain on the economies."
Meanwhile, lower-than-expected inflation figures in China have calmed fears that authorities in the world’s largest consumer of base metals will react with further monetary tightening measures.
China’s CPI for September came in on Friday at 6.1 percent, matching the forecast of 6.1 percent and a slight drop from 6.2 percent in August. The country’s September PPI data beat expectations at 6.5 percent against the forecast of 7 percent, and was a significant drop from 7.3 percent in August.
“The data from China was better than expected, and it shows that inflation is now under control,” Jonathan Barratt, managing director at Commodity Broking Services in Sydney, said. “This indicates that China won’t be tightening its monetary policy further.”
Copper traded at $7,540 per tonne, up $230, after stocks fell 2,900 tonnes to 450,200 tonnes. Cancelled warrants also fell, down 1,975 tonnes at 49,875 tonnes.
Aluminium rose $12 to $2,229 after stocks fell 3,100 tonnes to 4,548,575 tonnes but cancelled warrants fell by 2,600 tonnes to 229,000 tonnes.
Nickel was $253 higher at $18,708, zinc at $1,940 was up $17 and tin rose to $22,480 from $21,950-22,000 on Thursday.
Lead recently traded at $2,037, up $1. Stocks fell 450 tonnes to 798,425 tonnes from what was an all-time high, while cancelled warrants declined 1,900 tonnes to 65,150 tonnes.
Steel billet was last indicated at $535/544 - stocks fell 1,625 tonnes to 64,610 and cancelled warrants fell 2,145 tonnes to 38,805 tonnes. In the minors, cobalt and molybdenum were both offered but not bid.
(Additional reporting by Greg Holt and Clara Denina)