LME MORNING - Metals turn lower, early corrective bounce stalls

By: Martin Hayes

London 10/05/2012 - Base metals reversed direction and eased during Thursday LME pre-market trading when an initial corrective bounce stalled, with little in the wider background to suggest the general downtrend will be reversed.

"We came in and it was a bit steadier but then it pulled back with the euro. Really, it is going to continue matching what happens elsewhere," a trader said.

The euro, which fell as low as 1.2909 against the dollar in the previous session, its weakest since January 23, tried to bounce but was again under pressure - it was trading around 1.2935 recently.

The eurozone debt crisis is back to the forefront after weekend elections in France and Greece. Fears that Greece would be declared insolvent and would exit the eurozone eased when Athens secured the latest 5.2-billion-euro tranche of bailout funds.

But sentiment remains fragile given the country's political crisis and Spain's banking worries - Madrid has taken over Bankia, the country's fourth-largest lender, which is exposed to more than 30 billion euros of toxic loans.

The yield on Spanish 10-year bonds rose through the key milestone of six percent yesterday but has since eased back below that level.

"European debt issues, political uncertainties and the future of the single currency continued to plague the financial markets... macroeconomic conditions drive sentiment at present," LME RDM Sucden said.

Earlier in Asia, meanwhile, China's export and import growth slowed in April, raising concerns about a slowdown in its economy. Total exports climbed by 4.9 percent year-on-year while imports grew only slightly by 0.8 percent on the same basis.

The country posted an overall trade surplus of $18.4 billion in April, exceeding expectations for a trade surplus of $10 billion.

Later in the session, US data releases include the April trade balance and federal budget balance, March US import prices, and weekly US unemployment claims. Recent figures from the US, particularly the April employment report last week, have cast doubts over the pace of economic recovery.


Copper, which fell to two-week lows of $7,950 per tonne on Wednesday, bounced above $8,100 and then fell back to $8,035, an $18 loss. Some cushioning above $8,000 is anticipated, given inventory trends and tightness.

Warehouse stocks fell for the 14th successive day - down 1,075 tonnes at 219,850 tonnes, the lowest since October 2008. Nearby tightness remains intense, with 'TOM/next' business ranging from $11.00 to $5.00 backwardation. The cash/threes spread was indicated at $102/110 backwardation.

In Chinese trade data, the country's copper imports in April fell 18.8 percent month-on-month to 375,258 tonnes.

Aluminium, which hit $2,025.75 yesterday, its lowest since January 5, was trading at $2,040, down $9 from yesterday. China's aluminium imports fell 21.7 percent to 94,352 tonnes last month.

Stocks fell a punchy 12,600 tonnes to 4,946,825 tonnes, the lowest since December 2011.

In other metals, zinc traded at $1,940, a $3 loss. Stocks were down 1,575 tonnes but at 935,075 tonnes remain close to 17-year highs. Lead was $8 lower at $2,067, although inventories fell 1,150 tonnes to 352,675 tonnes, the lowest since late January.

Nickel business at $17,085 was down from a previous $17,195, with stocks rising 570 tonnes to 106,362 tonnes, the highest for 10 months. Tin was $105 lower at $20,500.

Steel was neglected but stocks were down 1,235 tonnes at 28,730 tonnes, the lowest since July 2010. Cobalt was quoted at $30,000/31,750, while molybdenum traded at $30,000.

(Additional reporting by Gregory Holt in Singapore, editing by Mark Shaw)