London 12/04/2011 - The metals spiked higher on Monday on the back of follow through buying from the strong performance seen last week. At the day’s highs prices were up an average of 1.2 percent – they ended the day mixed, with the two benchmark contracts in negative territory with copper down 0.7 percent at $2,828 and aluminium down 1 percent at $2,682. Dollar weakness remains a feature with the euro at 1.4450, while the dollar index remained slumped down at 74.94. Overnight a weaker tone has prevailed with the base metal off by an average of 0.9 percent, tin leads the way with a 1.8 percent drop to $32,600, copper is down 0.7 percent at $9,757 and aluminium is down 0.5 percent at $2,668. Volumes have been average with 2,985 lots of copper, 1,061 lots of zinc and 730 lots of aluminium traded. In Shanghai the June contracts (Sept for lead) are also under pressure with average losses of 1.1 percent, lead is off 1.5 percent at Rmb 18,990, zinc is down 1.1 percent at Rmb 18,655, copper is down 1 percent at Rmb 72,800 and aluminium is down 0.5 percent at Rmb 16,815. Spot copper in Changjiang is down 0.8 percent at Rmb 72,750-73,100 which puts the spot price either side of the futures, while the LME/Shanghai arb remains firmly shut with imported copper at a $315/tonne premium to local prices. Equities are weaker this morning, last night the Dow closed up 1 point, but Asia has the Nikkei down 1.7 percent, the Hang Seng down 1.2 percent, the MSCI Asia Apex down 2 percent, although China is managing to buck the trend with a 0.3 percent gain. The markets are underwater as the IMF cuts its forecast slightly for growth in Japan and the US. The dollar is slightly firmer this morning with the dollar index at 75.15 that is after Friday’s low of 74.85. The euro is last at 1.4390, the pound at 1.6280, the yen is firmer at 83.90 and the aussie is last at 1.0430. Gold is weaker at $1,458 and silver is last at 40.15 and oil is weaker at $108.60 having almost been up to the $110 level. The economic calendar is busy today, UK high street retail sales have come in weak suggesting the impact of the austerity measures are beginning to bite. Later we get more direction in UK CPI and RPI, German and EU economic sentiment, the US trade balance, economic optimism and the Federal budget balance, plus there are numerous FOMC members speaking, see table on right for ore details. Our short term view is that the markets are consolidating after a strong few days, which seemed to peak yesterday. This consolidation is likely to see prices pull back to look for support levels that hold, but given the strong gains since last Wednesday the metals could give back a fair amount of their recent gains. How they handle this pull back is likely to say a lot about underlying sentiment.

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