LME MORNING - Base metals drift lower, copper price corrects after Friday spike

By: Kathleen Retourne

London 20/08/2013 - Base metals continued to drift lower in Tuesday morning LME trading, giving up more of last week’s gains, on concerns that the US Federal Reserve will start to unwind its stimulus measures from as early as next month.

The US Federal Open Market Committee (FOMC) will release the minutes of its July meeting on Wednesday, with the market expecting further hints on the longevity of quantitative easing. According to consensus, the US central bank will start to taper from next month.

“Uncertainty around the Fed tapering that accompanies the release of the minutes Wednesday and the Jackson Hole gathering after that for sure weighed on sentiment,” LME ring-dealer member Triland said in a commentary. “For this reason [we] expect further gains to be capped until more light is given on the matter.”

“Markets are likely to show a ‘taper-tantrum’,” a trader said. “Prices react every time the Fed squirts money in so it is to be expected when it goes other way - watch out if [chairman Ben] Bernanke turns off the tap.”

Today’s data schedule is light. Earlier, the German PPI for July at -0.1 percent undershot the expected 0.2 percent, while the June Japan all-industries activity index came in at -0.6 percent.

In the metals, copper at $7,265 per tonne was down $41 on the previous day’s close, with little action the Select - around 6,600 lots have changed hands so far.

“We needed a correction and here it is,” the trader said. “Asian stocks were down overnight and this weighed on assets. Technical levels are showing slight signs of stress from the moves seen in the past couple of weeks."

On Friday, copper jumped to a two-month high above $7,400, although this has since been attributed to trader error.

“Copper was up there for the wrong reasons so I am not surprised we have since started to see it drift,” the trader added.

Inventories fell for the 25th consecutive day to their lowest since April 3, dropping a net 4,925 tonnes to 572,525 tonnes level. Busan, Johor and New Orleans stocks are down 35 percent, 17 percent and seven percent respectively over the past month. Cancelled warrants fell to a one-month low of 297,700 tonnes.

Aluminium was down $12 at $1,904 after a 4,375-tonne increase in stocks and a 5,050-tonne drop in cancelled warrants to 2,049,550 tonnes.  

Zinc trading was active in Asia - volumes today are only just behind those of copper, with 6,100 lots changing hands so far. The metal was last at $1,970, down $17.50. Stocks and cancelled warrants fell 2,525 tonnes to 1,032,175 tonnes and 600,550 tonnes respectively.

Lead at $2,220 was down $30 - inventories and cancelled warrants fell 2,975 tonnes. Nickel lost $129 at $14,681, while both stocks and cancelled warrants were at fresh all-time highs at 208,575 tonnes and 39,018 tonnes respectively.

Tin slipped $100 to $21,750 after stocks rose 120 tonnes to 13,935 tonnes. Steel was indicated at $120/200, while cobalt and molybdenum were neglected.

(Editing by Mark Shaw)