LME MORNING - Base metals jump on increasing optimism in global markets

By: Kathleen Retourne

London 19/01/2012 - Base metals saw a strong start on Thursday morning amid increasing optimism in the global markets, in particular Asia and the US.

Positive economic data from the US, hopes of further monetary easing measures in China, plus firm Asian equity markets, have seen an increase in risk-on sentiment today.

Even the eurozone, which has been a thorn in the side of global recovery, has become more optimistic, as news that the IMF was seeking new measures to stem the eurozone debt crisis filtered through the market.

On Wednesday, the International Monetary Fund (IMF) announced it was seeking as much as $500 billion more for loans to countries with short-term difficulties to maintain bond market stability.

“Generally speaking, we are continuing to see very robust global demand against the backdrop of the sovereign-debt crisis in the eurozone and the uncertain economic outlook," said Commerbank. "We still anticipate rising copper prices in the medium to long term, though there is also profit-taking potential in the short term."

Today’s price increases bode well from a technical standpoint, particularly if the complex closes above 100-day moving average levels for the third consecutive day, which could encourage technical short-covering. 

News that Germany had cut its 2012 growth forecasts had little impact on the market, with the metals complex still hovering around its session highs.

However, with eurozone issues far from being resolved, market sentiment remains shaky and susceptible to drops should there be any negative newsflow or data. 

“Consumers are still very much living hand to mouth until there are more concrete signs of a recovery,” said RBC.

Data wise, China’s leading indicators have climbed and later we details of the EU current account, US CPI, various housing data, initial jobless claims and Philly Fed manufacturing index, plus oil and gas inventories.

“All eyes will be on initial jobless claims after last week’s disappointing figures, but the housing data is also likely to be keenly watched to see if the better economic data out in recent months is boosting confidence in the all important housing market,” said FastMarkets analyst William Adams.

COPPER AT FOUR MONTH HIGH

Copper peaked to $8,410 per tonne this morning, its highest for four months. It has since slipped back slightly to $8,381 but is still up $146 on Wednesday’s close after stocks fell for the 12th consecutive day.

LME warehouse stocks fell a net 1,300 tonnes to 351,200 tonnes, while cancelled warrants at 69,800 tonnes were the highest since May 14, 2009 - New Orleans was responsible for 50,200 tonnes of cancelled material.

Aluminium was up $32 to $2,236, a session high. Inventories remain above 5 million tonnes after rising as net 75 tonnes to 5,005,225 tonnes. The fact that 4,100 tonnes went into New Orleans was unusual - Detroit or Vlissingen are more typical locations. Cancelled warrants at 771,025 tonnes were up 7,725 tonnes due to large cancellations in Detroit and Vlissingen.

Zinc was up more than 1.5 percent at $2,030, up $29 on Wednesday's closing price. Stocks rose for the third consecutive day, up 1,050 tonnes to 840,500 tonnes, while cancelled warrants jumped 14,925 tonnes to 22,700 tonnes due to Johor cancelling 16,275 tonnes.

Lead prices were up $23.50 to $2,162.50. Stocks were down 575 tonnes to 348,725 tonnes, while cancelled warrants saw a sharp increase of 16,050 tonnes to 44,350 tonnes, the largest since December 13 due to large cancellations in Detroit and Johor.

Nickel business at $19,711 was up $216 as stocks fell 120 tonnes to 91,788 tonnes. Tin increased $195 to $21,975 while stocks were unchanged at 67,990 tonnes.  

“Although Indonesia has again been exporting high volumes of tin following the failure of the export ban in December, bad weather may again hamper production and transport,” said Commerzbank.

“What is more, China, the world’s largest producer of tin, produced ‘only’ 9,100 tonnes of tin in December, 38 percent less than the previous year. This is likely to have been offset by higher imports. In our opinion the price of tin has risen too sharply recently, so we see correction potential.”

Steel at $532/540 was up $2, while in the minors, cobalt was quoted at $32,000/32,950 and molybdenum was bid at $29,500.

(Editing by XX)  

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