LME MORNING - Base metals steadier as short-term worries abate

By: Martin Hayes

London 27/06/2013 - Base metals notched up gains during Thursday LME premarket trading, underpinned by similar patterns in other markets - equities were higher, while the euro regained some of yesterday's losses against the dollar, traders said.

"We came in this morning and it hadn't been sold off in the Far East for once so there has been a bit of buying around, although nobody is really looking for volume," a trader said.

Technically, the metals are building on yesterday - although they made further losses, the downside pressure at the start of the week has abated.

"With the stochastics generally recovering too, there may well be room on the upside for a recovery to get going," William Adams of FastMarkets said.

But upside momentum was modest, with more significant advances ruled out by short-term uncertainty over macroeconomic fundamentals and the rundown in physical offtake and activity as the summer progresses.

"How the market handles any recovery, whether it attracts short-covering or how quickly higher prices get sat on with further selling, should give us some insight into how bearish sentiment still is," Adams added.

The dollar, at three-week highs of 1.2982 against the euro yesterday, retraced to around 1.3030, while stock markets in Asia and Europe gained.

But the metals, like other financial markets, remain susceptible to nervy movements in the short-term, given that macroeconomic fundamentals are in a state of flux. In the US on Wednesday, first-quarter GDP growth at 1.8 percent, although below expectations for a reading of 2.4 percent, conversely checked the pace of declines.

Strong figures would have furthered the case for the Federal Reserve to pull back on long-standing monetary stimulus and follow through on its plans to taper its third quantitative easing programme. This suggested the opposite, however, which could see the US having second thoughts about its stimulus withdrawal - the factor that sparked turmoil in markets last week.

In China, economic expansion trends have been tested by the country cracking down on excessive credit, which has squeezed short-term interest rates.

"Signs of [monetary] easing - and therefore support - are evident from China, where money-market rates are falling further after the Chinese central bank chose not to withdraw any liquidity from the market," broker Commerzbank said.

For today, there is a busy data-stream. Among figures so far, May German import prices fell 0.4 percent, while the number of jobless fell 12,000 instead of rising 7,000. The June eurozone retail PMI was 49.1 against last month's 46.8.

US data later comprises May PCE Price Index, May personal spending and personal income figures, May pending home sales figures, and the regular weekly US unemployment claims.


Copper was trading at $6,777 per tonne, up $37 from the Wednesday close. So far this morning prices have ranged under $6,800 - an intermediate chart level, but held above $6,700. Below here, a retest of the three-year low of $6,602 set on Tuesday is envisaged.

Warehouse stocks fell again from early-week 10-year highs, with a net 3,675-tonne decline to 667,425 tonnes. Cancelled warrants, the metal booked for removal and in queues, jumped to another all-time high of 375,425 tonnes.

Aluminium was just $6 higher at $1,774, with prices again constricted to a tight range not far above the early-week four-year lows of $1,762.50. Inventories were down 5,525 tonnes from what were all-time highs to 5,442,475 tonnes.

Similarly, nickel at $13,818 was above yesterday's $13,605 close. It needs to move back above $14,000 to avoid a swing down to retest the four-year lows of $13,525. Inventories declined 312 tonnes from their all-time high to 187,644 tonnes.

In others, zinc traded at $1,849, an $11 advance, while stocks were down 5,250 tonnes to another five-week low of 1,057,700 tonnes. Lead climbed $17 to $2,048 but inventories rose 3,400 tonnes to 198,000 while tin at $19,900 was $200 higher- stocks rose 30 tonnes to 14,170 tonnes.

Steel billet was indicated at a wide $140/210, with stocks static at 74,880 tonnes. Cobalt was trading at $31,000, up $1,000 - inventories declined two tonnes to 447 tonnes. Molybdenum was neglected.

(Editing by Mark Shaw)