LME MORNING - Metals relinquish some gains, euro retracement checks upside moves

London, 20 July 2010 - Base metals faltered during LME trading on Tuesday morning, with prices retreating from initially firm levels as the euro stepped back from its fresh two-month highs, although values in the complex largely remained steadier.

Equity markets were steady as well, contributing to the generally stable mood, although much of the movement in the metals complex was rangy.

"The uptick in risk appetite this morning should give base metals sentiment a short-term boost. But with negative technical chart pictures in several metals and volumes thinning over the summer holiday season, there may be more downside price direction brewing," analyst James Moore at FastMarkets said.

As has been the case in recent sessions, the metals are locked into a summer ranging pattern, generally fluctuating in kneejerk responses to external financial drivers. The euro, which had spiked above 1.30 against the dollar earlier to a fresh two-month high, subsequently settled back below that level. It traded recently around a little-changed 1.2970.

The latest daily warehouse data, which showed customary falls in some, checked aluminium notably - there was a large warranting. Within the metals suite, short-term sentiment remains clouded by recent uninspiring data and corporate earnings as well as seasonal trading lethargy.

"Concerns about slowing growth and the summer slowdown continue to cap prices," a trader said. "We continue to look to external factors in the meantime, as the summer silly season continues to play out."

The metals market looks set to continue to range as it has for the last few weeks, while the summer holiday period runs its course, but there are some positive glimmerings, analysts said.

"Fundamentals remain supportive, especially for copper... we think that industrial metals have entered a bottoming process, while any disappointing macroeconomic data is likely to affect near-term sentiment," broker Credit Suisse said.

Shares were unfazed by the previous day's weak revenue growth at top US firms and more weak economic data, with European shares up some 0.2 percent. Earnings from key tech firms IBM and chip maker Texas Instruments were released after the US markets closed but both companies failed to impress - their top-line revenue growth disappointed.

"The market appears to have absorbed last week’s soft China growth numbers and now looks to be fence-sitting for the latest US housing statistics - although sensitivity to the once bellwether release has been muted by the very low base from which it now sits," ANZ Bank said.

On Monday, the July NAHB Housing Market Index came in at 14, against an expected 16 and the previous reading of 17. This is the lowest since April 2009. Later today, the US data flow steps up a gear with US building permits and housing starts figures due for release.


Copper, above $6,600 at one stage, backtracked to $6,579, still up $71 from Monday's close. The run of inventory drawdowns was sustained - today’s was the 23rd successive daily decline. Stocks fell 3,250 tonnes to 419,600 tonnes, the lowest again since November 18, 2009.

With July now nearly over, inventory movements have bucked the usual trend for that month. Although inventories rise nearly every year, they have fallen a net 31,400 tonnes or seven percent in the month to date.

Aluminium reversed into the minus column, not helped by a bumper inventory increase. Prices, which been probing back towards $2,000, eased to $1,970, down $1.

Inventories leapt a net 48,275 tonnes or 1.1 percent to 4,417,100 tonnes, the highest since July 1. The increase was due to large warrantings in US stores at Chicago, Baltimore and Detroit - a common event in the week of the 'third Wednesday' monthly prompt date.

Nickel was trading at $18,958, still up from $18,800 previously after the 30th successive stock fall. Inventories dropped 330 tonnes to 118,206 tonnes, a fresh low since late September 2009.

Tin traded at $17,975, up $30 still - stocks fell 245 tonnes to 15,830 tonnes. They have now fallen on eight of the last nine days and stand at their lowest since mid-June 2009.

Zinc traded at $1,842, a $34 advance but off its highs - stocks rose a net 1,425 tonnes to 618,925 tonnes, the highest since June 1. Lead settled back below $1,800 to $1,794 but was still up $19 after stocks fell 1,000 tonnes to 185,775 tonnes.

Med steel billet inventories rose a hefty 13,845 tonnes or 46 percent to 43,875 tonnes, a three-month high, entirely due to warrantings in the Tekirdag warehouse. The price stood at a steady $435/445.

In the minor metals, cobalt was at $36,800/37,900 per tonne, around $200 lower, while molybdenum was steady at $30,500/33,000 - stocks were unchanged in both.

(Editing by Mark Shaw)