By Leon Westgate
The base metals finished very strongly on Tuesday with much of the complex closing around their intraday highs. That strength spilled over into Wednesday morning; however a weaker euro has since dragged prices lower with the metals coming off the boil a little heading into the afternoon.
While the euro has remained in charge of price direction this morning, attention is starting to focus on the key US macroeconomic data this afternoon. In particular, the Industrial Production figure for May will be closely watched (expected +0.9% m-om), with a further increase likely interpreted as confirmation of the general improvement in the underlying economy and therefore supportive for the industrial metals.
Volumes continue to be subdued across the board, however, the return of the Chinese market tomorrow after a three-day break, may see a lively overnight session as the SHFE market plays catch up to the LME.
With the market uncertain as to how the Chinese will react to the past three day’s price activity, volumes will likely remain under pressure. In that regard, any major price movement stemming from the US data may also be rather short lived, unless the data is significantly out of line with consensus expectations.
Copper has been the busiest of the base metals complex so far, though prices have to a large extent again been dominated by the Euro. 3-month copper traded up to $6,775 during the morning before a weaker euro dragged prices back below $6,700 heading into the afternoon.
There was another large decline in LME aluminium stock this morning, with on-warrant inventory falling by 20,275 mt. Unlike previous occasions however, the activity was focused in Europe rather than the US with a 17,350 mt increase in cancelled warrants, mainly in Antwerp and Rotterdam accounting for most of the drop.
