LME MORNING - Metals mostly lower, pause ahead of end-week ECB/US jobs events

By: Martin Hayes

London 05/09/2012 - Base metals backpedalled gently during relaxed Wednesday morning LME premarket trading, having opted to settle into a pattern of broad sideways trading in the run-up to upcoming key economic and data events that will dictate sentiment.

The key events and releases due this week will be scrutinised and should clarify the likelihood of more monetary stimulus in the US and Europe.

"Volumes may well dwindle as we head towards the ECB Thursday lunchtime announcement... expect rumour and counter-rumour about Draghi's text and specific plans," a trader said.

The crunch meeting by the European Central Bank will be closely watched for signs that the bank will embark on another round of purchases of short-term sovereign debt - or quantitative easing (QE) - to ease the current eurozone crisis.

"Trading is likely to be choppy...prices [may] consolidate at lower levels but, with hopes running high for more QE, either from Europe, Japan or China, we would expect dips to be well supported - at least in the short term," William Adams of FastMarkets said.

Investors are also reluctant to take big positions ahead of the key US August non-farm payrolls data due on Friday, which will illuminate the chances of more QE in the country, especially after Federal Reserve Chairman Ben Bernanke commented last week on the grave conditions of the US labour market.

Soft US manufacturing data and construction spending on Tuesday also raised expectations of further stimulus measures, which some hope could be announced at the Fed's meeting next week.

The euro was likewise marking time and drifting ahead of the ECB - it retreated to around 1.2520 versus the dollar, having hit a two-month high of 1.2638 last week.

For now, attention will focus on the late-morning September traded option expiries, although open interest is light at the ATM (at-the-money) strikes, traders said.

"It does not look that exciting - there are some calls (1,548) on aluminium at $1,925 - they could be partials [declarations]," one said.


Copper slipped back from levels above $7,600 to trade at $7,590 per tonne, a $45 loss from Tuesday. Inventories fell for the eighth day in a row - down a net 3,750 tonnes at 215,050 tonnes, the lowest level since October 2011.

Despite recent advances, copper's upside is capped by concerns on the effect the current slowdown in China will have on metals demand.

"That being said, the price activity remains good and we expect more upside during the month of September," broker RBC said. "There of course will be the usual dips on European worries and overall China sentiment will dictate whether we end up being too positive."

Aluminium eased to $1,936, an $8.50 loss, after reaching a two-month high of $1,954 on Tuesday. Stocks were down 3,850 tonnes at 4,874,625 tonnes. The crunch Sept/Oct spread stood around $3.00 backwardation.

Lead business at $1,990 was $5 lower. Meanwhile, stocks declined for the 17th successive day, with the 1,250-tonne decline taking the stockpile down to 304,475 tonnes, the lowest again since April 2011.

In other metals, nickel traded at $15,870, a $45 loss - inventories climbed 384 tonnes to 120,054 tonnes. Zinc was $5 lower at $1,871 but stocks were down 1,500 tonnes at 948,050 tonnes. Tin fell $205 to $19,305, while inventories dropped 25 tonnes to 11,660 tonnes.

Steel billet was neglected, with stocks motionless at 50,115 tonnes. In the minors, cobalt was steady at $29,000/30,000, while molybdenum was neglected.

(Additional reporting by Perrine Faye, editing by Mark Shaw)