London 09/10/2013 - Base metals were in negative territory in Wednesday's premarket, reflecting increasingly caution, while a modest strengthening of the dollar - last at 1.3520 against the euro, moving further from recent eight-month lows - also weighed.
In the US, Congressional Republicans and Democrats continue to wrangle over the 2013/2014 budget ahead of an onrushing deadline to raise the county's debt ceiling and prevent a disastrous default.
“We expect the metals to trade sideways - we feel there is room for a relief rally should a [debt ceiling] deal be struck ahead of October 17 but conversely a more pronounced cross market sell-off could be seen if the impasse continues to the deadline,” FastMarkets analyst William Adams said.
For today, the market will focus on the release of the Federal Open Market Committee minutes on Wednesday, following its surprise decision last month not to start to taper its quantitative easing programme.
Multiple news sources also reported that President Obama is set to nominate Janet Yellen as the new head of the Federal Reserve, replacing Ben Bernanke. The nomination of Yellen, widely known as a policy dove, could aid markets after yesterday’s broad losses.
“Market participants appear unwilling to enter new positions as the political uncertainty in the US drags on,” Credit Suisse said. “The IMF’s downgrade of global growth prospects additionally weighed on commodity market sentiment. Trading conditions are likely to remain lacklustre for now."
The International Monetary Fund cut its global economic growth forecast to 2.9 percent for this year. In 2014 it expects global growth of 3.6 percent, down from 3.8 percent previously.
The annual LME Week Dinner took place yesterday - activity this morning has been muted
“With most base metal market players recovering from last night’s festivities at the LME dinner, we would think today will be rather subdued,” RBC Capital Markets said.
Copper traded recently at $7,189 per tonne, down $50 on Tuesday’s close, while 7,800 lots have changed hands on Select so far. Inventories fell a net 1,525 tonnes, marking the 25th consecutive day of declines, to 515,575 tonnes.
Aluminium fell $11 to $1,876 despite a jump in cancelled warrants. Metal booked for removal climbed 33,125 tonnes due to cancellations in New Orleans - total cancelled warrants there stand at 1,014,375 tonnes.
Nickel at $13,853 was down $47 after stocks hit a fresh all-time high of 229,230 tonnes. Lead at $2,094 was up just $1 - stocks and cancelled warrants were both 375 tonnes higher.
Zinc was up $8 at $1,893 after a 3,275-tonne reduction in both stocks and cancelled warrants to 1,002,725 tonnes and 566,325 tonnes respectively. Tin edged $7 lower to $23,543 following a 210-tonnes fall in inventories to 12,835 tonnes.
Steel was neglected although stocks and cancelled warrants both declined 1,755 tonnes. Cobalt and molybdenum were also neglected.
(Additional reporting by Lynette Tan, editing by Mark Shaw)