London 23/04/2012 - Base metals tracked lower on the LME on Monday morning after sentiment took a blow from weak economic data out of Europe and a softer euro.
Weakening sentiment triggered profit-taking in copper, with 12,500 lots changing hands on Select so far in flurry of selling that pushed the metal close to the psychologically important level of $8,000.
Euro flash manufacturing PMI data came in below expectations at 46.0 against a forecast of 47.7 and flash services PMI fell to 47.9, down on the expected 49.4. German and French data added to eurozone woes - flash PMI and manufacturing PMI for both countries undershot forecasts.
“A very poor French flash services and manufacturing PMI and a poor German flash manufacturing PMI this morning have added to the negative sentiment that surfaced in Asian trading following the poor HSBC Chinese manufacturing PMI,” FastMarkets analyst Jono Remington-Hobbs said.
“The German manufacturing, French and Chinese data indicate contraction in their respective sectors; with no US data out today, risk assets could remain under duress,” he added.
The International Monetary Fund (INF) said over the weekend that it would double its war chest to more than $430 billion to stem debt contagion in the eurozone. Still, investors remain nervous about the economy’s stability.
Sunday also saw the start of French presidential elections. The euro dropped after Francois Hollande won 28.56 percent of the vote, beating incumbent Nicolas Sarkozy’s 27.07 percent. Attention will now turn to a May 6 run-off vote.
COPPER CANCELLED WARRANTS JUMP
Copper has dropped nearly two percent on Friday’s close but is managing to hold above $8,000 for now - it recently traded at $8,046.50 per tonne, a $143.50 loss.
Inventories were down 2,300 tonnes to 258,850 tonnes, with reductions in New Orleans, St Louis, Rotterdam and Chicago. Cancelled warrants – the metal booked for removal – saw a notable jump of 41,450 tonnes. Busan saw a 7,250-tonne increase to 11,100 tonnes, while Rotterdam at 16,125 tonnes was up 14,825 tonnes and Singapore rose 4,600 tonnes to 5,700 tonnes.
Tightness in the nearby spreads has eased from last week’s highs - May/June is at $18/23 backwardation and cash/May at $20/47 backwardation - but the increase in cancelled warrants could see backwardations rise again.
“No reason I can think of [for the cancelled warrant increase] but it should encourage the nearby backwardation to spike again,” a trader said.
“In the current market environment, copper is likely to remain under pressure. Speculative financial investors are also continuing to display pessimism, slashing their net long positions in copper by a further 25 percent to just 2,200 contracts in the week to 17 April, their lowest level for 14 weeks,” Commerzbank said.
China copper imports for March fell eight percent to 345,700 tonnes on the previous month - inventories are now said to be at an all-time high.
“China had been importing more copper than it needed in the months prior to March, which is reflected in rising inventories,” Commerzbank added.
Aluminium fell to $2,061, down $23. LME warehouse stocks dropped 5,775 tonnes to 5,052,700 tonnes - Busan was the only warehouse where inventories rose, up 4,225 tonnes at 64,875 tonnes, while they fell in Vlissingen, Detroit, Baltimore and Johor. Cancelled warrants at 1,667,925 tonnes were down 2,575 tonnes.
Lead was down almost two percent at $2,086.50, falling $39.50. Inventories were down 750 tonnes to 368,400 tonnes, while cancelled warrants at 37,150 tonnes were up 4,575 tonnes.
Sister metal zinc at $2,001 was down $29. Stocks at 910,850 tonnes were down 50 tonnes and cancelled warrants at 19,125 tonnes rose 3,575 tonnes.
Nickel declined $154 to $17,651 after stocks fell 450 tonnes to 99,630 tonnes but cancelled warrants slipped to 3,756 tonnes, down 318 tonnes.
Tin, the worst performer last week – is now at $21,313, down $187. Stocks at 13,810 tonnes were up 165 tonnes and cancelled warrants were up 225 tonnes.
Steel business slipped below $500 for the first time since October 27, 2010 - it was last quoted at $495/508. Stocks were up 130 tonnes at 30,615 tonnes and cancelled warrants were stagnant at 3,380 tonnes.
In the minor metals, cobalt stocks rose nine tonnes to 355 tonnes, with prices indicated at $30,000/30,800. Molybdenum was quoted at $30,500/32,000.
(Editing by Mark Shaw)