LME MORNING -Base metals ignore euro's 6-mth high, tread water in thin trading

By: Kathleen Retourne

London 03/10/2013 - Premarket base metals trading on Thursday was extremely quiet ahead of LME Week and while Chinese participants remain absent, with base metals also seemingly indifferent to the US government shutdown and tentative signs of an economic recovery in the eurozone.

“Prices are treading water as we are in the midst of Chinese Golden Week holidays,” a trader said. “Markets have been rangebound for the most part and with LME Week once again upon us the industry will be descending on London, so activity will be minimal next week also. A weaker dollar as the US government shutdown takes hold is keeping the downside at bay for now.”

Alongside yesterday’s poor ADP non-farm employment numbers, the partial shutdown of the US government - the first in 17 years - after politicians failed to agree a 2013/2014 budget before Monday’s deadline has weighed on the dollar and deterred interest.

In an interview with CNBC, President Obama said that Wall Street should be concerned about the political gridlock, suggesting that markets could continue lower for the rest of the week.

The euro was last at 1.3607 against the greenback, a six-month high, after retail sales rose 0.7 percent in the euro area and 0.4 percent across the EU in August, with July’s data also revised higher.

In service PMIs for September, Spain disappointed at 49.0 but Italy was better-than-expected at 52.7 and the eurozone-wide number came in around expectations at 52.2.

Still, Spain sold 1.18 billion euros of 10-year bonds this morning at a yield of 4.269 percent, the lowest since September 2010

The UK PMI at 60.3 was just below August’s seven-month high of 60.5, while the country’s PMI over the July-September was the strongest since the second quarter of 1997.

Earlier today, the Chinese non-manufacturing PMI improved to 55.4 in September from 53.9 in August. Earlier this week, though, the Chinese manufacturing PMI at 51.1 missed the forecast 51.6.

The US is scheduled to release unemployment claims and ISM non-manufacturing PMI later today.

In the metals, copper at $7,290 per tonne was up $11 on Wednesday’s close, while volumes were very thin at just 2,300 lots on Select so far. Inventories fell a net 1,925 tonnes to their lowest since mid-March again, while cancelled warrants at 265,150 tonnes were down 1,850 tonnes.

Aluminium was just $1 higher at $1,839 - stocks fell 6,250 tonnes to 5,366,125 tonnes and cancelled warrants at 1,877,250 tonnes declined 7,350 tonnes.

Nickel climbed $67 to $13,847 after stocks fell 294 tonnes to 226,998 tonnes. Lead at $2,081 was $6 higher following 550-tonne reductions in both stocks and cancelled warrants.

Zinc at $1,886 was down $2 - stocks and cancelled warrants both fell 4,800 tonnes to 1,014,675 tonnes and 578,525 tonnes respectively. Tin climbed $74 to $22,900, with stocks edging 25 tonnes lower to 13,170 tonnes.

Steel and molybdenum were neglected, while cobalt was indicated at $26,500/28,000.

(Additional reporting by Lynette Tan, editing by Mark Shaw)