Monday 22 November 2010

LME LATEST - Metals trade sideways, hold gains on steadier euro

- Base metals settled into a sideways ranging pattern on the LME on Monday morning, largely holding modest gains. They were underpinned by the euro's steadiness after the weekend Irish financial bailout package and consolidating in the middle of the session's ranges. Despite the multi-billion-euro loan package that Ireland has requested, sovereign debt will remain an issue in the eurozone, so sentiment in the metals complex has been laced with caution.

- Copper, which stalled above $8,500, was trading lightly at $8,430 per tonne, still a $26 advance from Friday. Inventories continue to decline - they fell for the 12th day in a row, down 825 tonnes to 359,000 tonnes, the lowest once more since October 20, 2009.

- Aluminium was hemmed in below the $2,400 level, with business at $2,293, up $29 still. There was a 4,100-tonne fall in stocks to 4,298,025 tonnes. Nickel business at $22,000 was up just $150 while stocks recorded their fourth successive daily decline from what had been five-month highs, dropping a net 90 tonnes to 130,014 tonnes.

- Cobalt inventories, which have been declining modestly in recent days, reversed that trend and jumped 8.6 percent or 15 tonnes to 189 tonnes, due to warrantings in Rotterdam.

BASE METALS European Opening View - Metals get some lift as dollar weakens

The metals started off by extending their rebounds on Friday, with prices seeing average gains of 1.5 percent at the day’s highs, but then selling emerged and prices ended the day with an average loss of 0.8 percent, although the performance was mixed. By and large the metals are in consolidation mode, whether they are also forming bear flags remains to be seen. That said, with China announcing price caps and increase banks’ reserve requirements and Ireland agreeing to an EU rescue package, risk aversion may ease now.

This morning the metals are up an average 1.1 percent, with lead up 1.8 percent at $2,315, copper is up 0.3 percent at $8,464, while aluminium is up 1.2 percent at $2,303. Volumes have been average, with 2,751 lots of copper and 1,301 lots of zinc traded, see table on right for more details.

In Shanghai the February contracts are off slightly across the board with average losses of 0.2 percent as they followed the LME’s lead from Friday. Copper is at Rmb 63,310, aluminium is down 0.2 percent at Rmb 16,400 while zinc is down 0.5 percent at Rmb 17,800.  Spot copper in Changjiang is 0.5 percent firmer at Rmb 63,000-63,400, while the LME/Shanghai copper arb remains firmly shut.

The dollar is weaker as the Euro has moved higher on the back of Ireland’s rescue package, it is last at 1.3784, the pound is firmer at 1.6060, the aussie is stronger at 0.9950 and the yen is firmer too at 83.40. Gold is stronger at $1,365 – aided by the weaker dollar, while oil is firmer too at $82.75.

Equities – the Dow closed up 0.2 percent on Friday, performance in Asia has been mixed with the Nikkei up 0.9 percent, the Hang Seng is down 0.4 percent, China’s CSI is down 0.2 percent and the MSCI Asia Apex is up 0.4 percent. So a mixed bag, although European equities are likely to start off on a positive footing given the Irish news.

On the economic front there is little data out, EU consumer confidence is out at 3pm GMT and President Trichet is talking at 4pm GMT.

So after the gyrations of last week the metals start this week in the middle of last week’s ranges – they have unwound both the early November overbought conditions and last week’s oversold conditions and are now waiting for fresh direction. On balance we would say prices were difficult to justify at the highs and with China now trying to rein in inflation, the fact that Ireland has had to seek assistance could mean there is more trouble ahead for Europe and with austerity going to be felt more in the months ahead, we feel prices are still over priced.
LME Overnight Performance
  7:20 AM +/- +/- % Lots
Cu 8464 24 0.3% 2751
Al 2303 27 1.2% 521
Ni 22170 270 1.2% 178
Zn 2205 25 1.1% 1301
Pb 2315 42 1.8% 189
Sn 25300 200 0.8% 9
Steel Med 516 0 0.0% 0

Economic Agenda
Time Country   ACTUAL Expected Previous
EU  Consumer Confidence   -10 -11
4:00pm EU  ECB President Trichet Speaks      

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