Monday 22 November 2010

LME LATEST - Chinese 'pulling base metals' strings'

- Base metals were under pressure during Friday’s open-outcry sessions at the LME after a long week of extraordinary volatility, as China’s decision to raise interest rates sent commodities and equity markets lower.

- Traders on the floor of the LME were spooked by inaccurate information published by Reuters earlier in the morning, which mistakenly showed that the Chinese cut the base rate and not the reserve rate by 50 basis points - “A much bigger deal”, according to one LME trader. This news triggered a sharp $80 sell-off in copper of nearly one percent simply based on a false premise. “The markets are overreacting to everything at the moment,” the trader added.

- “I feel really manipulated by the Chinese,” a second LME trader said. “It’s as if we’re their puppets.” Markets have remained focused on what measures China will take to cool inflation, which is currently running at 25-month highs. Traders also cite worries that the Chinese will release unreported stocks of metal soon to tame prices.

- Copper traded at $8,391, almost flat with yesterday’s close, after trading above $8,500 earlier in the session. Aluminium traded at $2,294, down $20, while zinc and lead also recorded losses. The dollar weakened against the euro, meanwhile, to around the 1.37 level.

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