London 26/03/2013 - Base metals were stuck sideways in thin conditions in Tuesday morning LME trading, maintaining the theme of the week running up the Easter break.
Further sluggishness is expected in the coming session - many market participants will be absent for Easter and Jewish Passover holidays from today to April 1.
“Lacklustre markets this week due to holidays, lacking direction [and] mainly rangebound,” a floor trader said. “The spectre of developments in Cyprus' situation looms large, with policy decisions to be focused on.”
News that Cyprus had agreed a deal with international lenders for a 10-billion-euro bailout provided some muted optimism at the start of the week but this proved short-lived, with metals sliding into yesterday’s close, European benchmark bond yields rising and banking stocks falling. Defensive equities and German Bunds headed slightly higher, Credit Suisse said.
“This, in our view, shows that those banks are not yet out of the woods in terms of vulnerability and investor confidence has not been fully restored,” it added.
“In the near term, we see the danger coming from a more broad-based sell-off in equities but, in the absence of that, we expect a stronger recovery in China to feed through into stronger demand for metals,” FastMarkets analyst William Adams said.
In Cyprus, banks remain closed, with their reopening date now pushed back to Thursday and restrictions to be placed on transactions when they do open again. The banks have been closed since March 15.
Exact details of the deal struck to save the island nation from bankruptcy has yet to be confirmed but finance minister Michalis Sarris told journalists that those with savings greater than 100,000 euros (about $129,000) in the two largest banks, Laiki and Bank of Cyprus, stand to lose as much as 40 percent of their deposits.
The opaque situation in Cyprus has kept the euro under pressure over the past few days, though the single currency managed to regain some lost ground against the dollar - it was last at 1.2870, up around a fifth of a cent, but it had been above 1.30 on Monday.
“With Eurozone woes still in focus, we think the euro will remain driven by the development of the euro risk premium,” Credit Suisse said.
US data releases scheduled for Tuesday include the January S&P/CS Composite-20 HPI, February durable goods orders and new home sales figures, and the March CB Consumer Confidence index and Richmond Manufacturing Index.
RAGEBOUND TRADING CONTINUES
Recent copper business at $7,435 per tonne was up $15. Inventories rose for the 30th consecutive day to 566,325 tonnes, the highest level since October 6, 2003, after a net 975-tonne increase.
A potential short-covering rally could be attracting traders after non-commercial copper shorts hit a record high level of 730,000 tonnes, according to CFTC data, ANZ Research said.
“Copper net long positions are now sitting at a seven-month low, while open interest hit record high levels - all the market requires now is a positive trigger,” it added.
Aluminium was $7 higher at $1,922 although stocks jumped 16,650 tonnes to 5,239,150 tonnes after an 11,450-tonne increase in Vlissingen and a 6,750-tonne rise in Detroit. Cancelled warrants fell 7,475 tonnes to 1,946,375 tonnes.
Lead edged $6 lower to $2,175 - stocks fell 1,000 tonnes to 265,975 tonnes but cancelled warrants at 141,350 tonnes were down 1,500 tonnes. Zinc was last at $1,931.50, a $12.50 loss, after a 4,450-tonne drop in stocks to 1,184,700 tonnes and a 300-tonne fall in cancelled warrants to 714,425 tonnes.
Nickel last traded at $16,900, a $75 loss, after stocks rose 474 tonnes to 162,498 tonnes and cancelled warrants fell 24 tonnes to 26,526 tonnes. Tin was down $100 at $23,090 although stocks fell five tonnes to 14,105 tonnes and cancelled warrants rose 25 tonnes to 2,915 tonnes.
Steel was last indicated at $200/300, with no change in inventories for the 52nd consecutive day. Cobalt was quoted at $25,000/25,000 and molybdenum was offered at $26,500 but not bid.
(Editing by Mark Shaw)