LME MORNING - Metals turn mixed, corrective bounce runs out of steam

By: Martin Hayes

London 05/10/2011 -  Base metals turned mixed during Wednesday LME pre-market trading when the earlier upside momentum, generated by a backdrop of firmer equities and a steadier euro, stalled, albeit in fairly light post-LME Dinner trading.

Traders said the short-term mood remains jumpy and erratic price swings will continue for now, with today's trends more of a reactive corrective bounce to Tuesday's downswing.

"It is much of the same - there is not so much liquidity this week so we are seeing bigger day-trade moves," a trader said.

Analysts said today's moves maintained the current pattern of increasingly choppy intraday trading swings motivated by wider global macroeconomic factors, which remain largely downbeat.

"While we think the fundamental backdrop for metals looks still fairly constructive, the market’s focus will remain on deleveraging pressures and economic indicators," broker Credit Suisse said.

In the broader marketplace, equity markets in Europe moved higher, following trends in Asia, although they likewise stepped back from the highs - the UK FTSE was recently some 1.7 percent higher. The euro edged up from Tuesday's nine month lows to around 1.3300 against the dollar.

On Tuesday, Europe's finance ministers agreed to safeguard eurozone banks from the region's spreading debt crisis.

And in the US, Fed chairman Ben Bernanke said the central bank's policy committee sees inflationary pressures under control and given high unemployment, would be ready to ease monetary conditions further. This will set the focus for the September non-farm payrolls report at the end of this week.

But there is little solidity to sentiment amid worries over whether debt-ridden Greece will receive a further financial aid tranche, which has delayed until mid-November, while Moody's trimmed Italy's credit ratings - Standard & Poor's cut its rating on Italy last month.

"Trading looks set to remain choppy in the coming session while traders await tomorrow's ECB interest rate decision and particularly Friday's non-farm payrolls, which could potentially lead the metals lower should the reading miss the forecast 51,000 increase," James Moore of FastMarkets said.


Copper, three percent higher above $7,000 at one stage, settled back at $6,890 per tonne, still up $80 from the previous close. Warehouse stocks edged slightly lower, down a net 100 tonnes at 474,925 tonnes.

Aluminium continued to swing some $15 either side of the $2,200 level, with trade recently at $2,185, still up $11. Inventories fell 1,650 tonnes to 4,556,600 tonnes.

Lead trimmed gains after inventories jumped to new all-time highs, with business at $1,900 still up $12 but off the $1,933 high. Stocks rose 5,150 tonnes to 379,700 tonnes due to warrantings in Asian stores - 4,150 tonnes in Johor and 1,050 tonnes in Port Klang.

Elsewhere, zinc dropped $10 to $1,853 - stocks fell 1,175 tonnes to 814,525 tonnes, a fresh low since April.

Nickel traded at $18,600, down $100, even though inventories fell 1,080 tonnes to 95,382 tonnes. Tin business at $20,800 was down $195.

Steel was indicated at $550/560, while the minors were neglected.

(Editing by Mark Shaw)