LME MORNING - Base metals break resistance, await US data for clearer direction

By: Kathleen Retourne

London 16/08/2013 - Base metals were back in positive territory during Friday LME pre-market trading, although off the multi-week and multi-month highs which they peaked at in earlier business.

“Prices have broken previous resistance levels and seem well placed to move higher, given the backdrop of somewhat positive signs emanating from China,” a trader said. “A strong looking euro is also lending a hand. Look for aforementioned resistance to now provide support, barring any particularly bearish news.”

The single currency was last at 1.3335 against the dollar.

Also, gold broke out of its consolidation below the May 2013 low at $1,338 per ounce to close above its upper Bollinger band, showing renewed uptrend strength, said FastMarket analysts. This gave base metals the shunt they needed to break above their resistance levels.

“It will now be interesting to see how the market handles these breakouts and how soon the selling steps in,” said FastMarket analyst William Adams. “On balance we feel sentiment has become a bit more bullish and that might well drive more short-covering, but we feel higher prices for the industrial metals will attract producer hedging.”

Eurozone economic data was mixed - CPI and core CPI were as expected at 1.6 percent and 1.1 percent respectively. But the trade balance disappointed at a 14.9 billion euro deficit.

Later today, the US will release building permits, housing starts, preliminary non-farm productivity, preliminary UoM consumer sentiment and preliminary UoM inflation expectations.

“Today, the focus will be on US housing data. Good numbers could help to lift industrial metals prices,” said Credit Suisse.

Copper rose to its strongest since June 6, as it broke above $7,400 per tonne to $7,420. But it did not manage to hold at this level, and was last at $7,391, an $81 increase on the previous days close. Volumes were swiftn with around 15,000 lots changing hands on Select by 10:00 BST.

Inventories were down for the 22nd consecutive day after a net 125-tonne drawdown to 584,075 tonnes. Cancelled warrants at 310,650 tonnes were down 1,725 tonnes.

“The copper arbitrage is closed, which suggests that the stronger copper prices is not attracting, or indeed being driven by a pick-up in imports into China,” added FastMarkets analyst Will Adams.

In other metal news, there have been news reports that the surprise strike at BHP’s Chilean copper mine has come to an end after 24 hours.

Aluminium at $1,922 was up $15. Stocks and cancelled warrants were both down 5,800 tonnes to 5,438,675 tonnes and 2,060,400 tonnes respectively.

“The fact aluminium closed above the [$1,900] level is sending a strong signal and there seems to be no other direction but up for the metal at the moment,” said Triland.

Zinc peaked at a five-month high of $1,990, up $30, while stocks fell 2,600 tonnes 1,037,275 tonnes and cancelled warrants fell 2,225 tonnes to 605,650 tonnes. Sister metal lead rose $27 at $2,234 - it saw a 1,050-tonne decline in both stocks and cancelled warrants to 190,925 tonnes and 97,925 tonnes respectively.

Nickel inched closer to $15,000, hititng $14,950 and was last at $14,896, a $171 rise. Inventories were up 240 tonnes to 206,118 tonnes. Tin at $21,750 was up $160 with no change in stocks.

Steel was indicated at $120/199 while stocks were stagnant. In minors, cobalt was indicated at $23,500/25,800 and stocks increased five tonnes to 517 tonnes – an all-time high. Molybdenum was neglected.

(Editing by Martin Hayes)