LME MORNING - Base metals regain some lost ground on stimulus hopes

By: Eddie van der Walt

London 24/04/2013 - Base metals regained some strength in Wednesday's premarket on growing hopes for central bank rate cuts following the release of weak manufacturing data around the globe.

Copper briefly regained the $7,000 level  earlier and, although it has fallen back, it is still substantially higher alongside the rest of the complex.

"Equities have been given a lift overnight, helped in part by a slower-than-forecast inflation reading from Australia, giving the Reserve Bank of Australia more room to manoeuvre rates, while the BoE said it will extend plans to provide cheap finance to small businesses," FastMarkets analyst William Adams said.

Asian indices performed strongly, with the Nikkei adding 2.3 percent and the Hang Seng 1.7 percent. In Europe, the FTSE 100 is up a quarter of a percent and the German DAX added a third of a percent.

The ECB may also lower the base rate from 0.75 percent in a bid to stimulate the eurozone economy, the parlous state of which is causing alarm in Brussels.

Data from Germany disappointed this morning - the Ifo Business climate for April came in at 104.4, a full 2.0 index points below the forecast and 2.3 index points below the March reading. The index has fallen 3.0 index points over the past two months.

The metals were under pressure in the previous session, with copper falling to a one-and-a-half year low at $6,762 per tonne.

"Weak economic data from China and the eurozone sent metal prices into a tailspin yesterday," Commerzbank said in a note. "The resulting appreciation of the US dollar likewise weighed on prices."

The euro was last holding just above the 1.30 against the dollar, almost unchanged, while the dollar index slipped 0.06 since the overnight close to 82.95.

The previous session was dominated by data, with the Chinese HSBC flash manufacturing PMI number coming in below expectations at 50.5, while European PMI numbers also did little to impress.

"We continue to view recent weakness in the dataflow as consolidation, rather than the start of a 2012-sytle capitulation, but remain watchful of the loss of momentum in the manufacturing sector from these key countries," ANZ said.

"[The] weak readings have raised hopes for additional European Central Bank easing," Credit Suisse said in a note today, but added that its own base case was for the ECB to keep rates unchanged next week.

In data later today, US core durable goods orders are forecast at 0.5 percent. US Treasury secretary Jacob Lew is also due to speak.

In wider commodity markets, Brent crude oil has performed well so far, gaining 72 cents to $101.03 per barrel, while gold gained $12.10 to $1,424.65 per ounce.


Copper briefly regained the $7,000 level earlier, peaking at $7,053 before slipping back to $6,967.75 per tonne, still up $96.75 on the previous close.

Stocks fell for the second time this week, down 1,225 tonnes to 620,375 tonnes - 775 tonnes left Rotterdam and 500 tonnes left Antwerp. Cancelled warrants increased 4,000 tonnes to a record high of 167,500 tonnes.

"Out of all the base metals, copper still looks the most overvalued based on underlying cost structures but only marginally - another five-percent  fall in the copper price would start to significantly increase the chances that high-cost producers start to cut supply," ANZ said in a note.

Aluminium gained $9 to $1,904.50. Inventories fell 9,125 tonnes, with 3,050 tonnes leaving Detroit and 3,000 tonnes leaving Vlissingen, to 5,167,075 tonnes. Cancelled warrants fell 9,025 tonnes to 2,061,150 tonnes.

Zinc was last up $18.50 at $1,897.50 after a 6,050-tonne stock fall to 1,092,550 tonnes, the lowest since October 2012, with 2,550 tonnes leaving New Orleans, 2,000 tonnes exiting Antwerp and 1,500 tonnes coming out of Johor. Cancelled warrants rose 1,850 tonnes to 642,250 tonnes.

Nickel added $133 to $15,130, with stocks up 1,314 tonnes at 175,860 tonnes and cancelled warrants 996 tonnes higher at 26,778 tonnes.

Tin gained $340 to $20,900, with stocks falling 150 tonnes to 14,245 and cancelled warrants dipping 125 tonnes to 2,490.

Lead recently traded $18 higher at $2,033 - inventories declined 25 tonnes to 258,800 tonnes and cancelled warrants fell 325 tonnes to 150,950 tonnes.

Steel billet was quoted at $160/230,. In the minor metals, cobalt is indicated at $27,250/27,750 and molybdenum at $24,500/26,500. Stocks of both were unmoved in all three metals.

(Editing by Mark Shaw)