LME MORNING - Base metals rangebound ahead of data releases, rise in volatility expected

By: Kathleen Retourne

London 07/06/2013 - Base metals were sideways to slightly higher in Friday's premarket ahead of blockbuster jobs data from the US this afternoon and Chinese trade numbers tomorrow, which could result in choppy trading later today.

The dollar was last around 1.3230 against the euro. Yesterday it touched 1.3305 in the wake of the European Central Bank yesterday keeping interest rates unchanged and amid growing anticipation that today's US May jobs report would show that the country added less than the forecast 167,000 jobs last month.

This would diminish expectations that monetary stimulus bond-buying will be tailed back.

"In recent days the metals seem to have been driven higher by the weaker dollar - given that equity markets have been correcting in anticipation that the days of QE are numbered, it is strange that the dollar has been as weak as it has been," FastMarkets analyst William Adams said.

Although a weaker-than-expected result would point towards a slowdown in the US economic recovery that could weigh on metals consumption, it is difficult to gauge how the market would react since a disappointing result would lift expectations for prolonged US Federal Reserve monetary stimulus measures.

"Market participants appear reluctant to build new positions ahead of today’s US labour market data and Chinese economic data due over the weekend," Credit Suisse said.

"This is visible in industrial metals, which are particularly leveraged to economic growth and the Chinese industrial sector. The recent short covering boost could soon run out of steam if the data fail to provide some improvement. We expect erratic trading and increased volatility as we approach the weekend," itadded.

Elsewhere on the data side, the April German trade balance showed a 17.7-billion-euro surplus in April, more than expected, but the French equivalent was a 4.5-billion-euro deficit. Later today, US consumer credit figures will be released.

China will announce its trade balance for May tomorrow - this is seen rising to $20.8 billion from $18.2 billion in April. Metal prices are expected to react accordingly.


PRICES TICK UP, VOLUMES UNEXCEPTIONAL

Copper at $7,347 per tonne was up $2.50 on the previous day’s close. Stock movements were minimal - total inventories slipped a net 500 tonnes to 609,875 tonnes and cancelled warrants, the metal booked for removal, fell 575 tonnes to 223,075 tonnes.

On Select so fare today, fewer than 7,500 lots had changed hands by 10:45 London time.

Investors have maintained a positive outlook on the metal despite lacklustre demand conditions after operations at Freeport-McMoRan's Grasberg, the world's second-largest copper mine, halted pending an investigation into a tunnel collapse that could take as long as three months and remove 140,000 tonnes of copper from the market.

Aluminium was $4 stronger at $1,968. Stocks fell 8,750 tonnes to 5,187,275 tonnes and cancelled warrants dropped 8,650 tonnes to 2,069,100 tonnes.

Lead was the exception to the rule, slipping $2 to $2,199 after inventories dropped for the 17th consecutive day, down 2,525 tonnes at 205,225 tonnes, while cancelled warrants fell 3,650 tonnes to 151,650 tonnes.

Zinc, which seen a spate of decent two-way buying activity this week, rose $8.50 to $1,941.50, shrugging off a 28,100-tonne jump in inventories to 1,110,150 tonnes. The bulk of this rise was due to a 27,375-tonne rise in Antwerp - total stocks there now stand at 212,500 tonnes. Cancelled warrants, meanwhile, fell 3,950 tonnes to 722,600 tonnes.

Nickel at $15,150 was up $55 on the previous close, while stocks jumped 2,466 tonnes to 182,274 tonnes. Cancelled warrants were also higher, increasing 582 tonnes to 23,850 tonnes.

Tin at $20,959 was $104 higher even after second day of increases in stocks, up 200 tonnes to 14,435 tonnes. Cancelled warrants rose 10 tonnes to 3,115 tonnes.

Steel was quoted at $155/165, with no changes in stocks. In the minor metals, cobalt was indicated at $28,500/30,500 after stocks climbed 30 tonnes to 446 tonnes while molybdenum was neglected.


(Editing by Mark Shaw)

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