FX:LME MORNING - Metals retreat as fundamental mood darkens, dollar firms
By: Martin Hayes
London 16/06/2011 - Base metals fell across the board on the LME on Thursday, taking their cue from wider financial markets where losses were seen on fears of a Greek sovereign debt default, while a strong dollar also put pressure on prices.
Nickel eased to a new 6-1/2 month low, lead its softist since early-June, while aluminium and zinc dropped to their lowest since late-May.
"There is actually not a lot of interest out there, but it (LME) is coming off because of the currency and that (Greek) situation. Stock markets are on their knees as well," a trader said.
The dollar hit its highest since late-May at 1.4069 against the euro this morning, settling recently at a strong 1.4100.
Economic turmoil in the eurozone continued to reverberate across financial markets, following further developments in Greece.
Prime Minister George Papandreou yesterday offered to resign amid widespread demonstrations in Athens and political deadlock, which could see the country fail to secure the latest tranche of financial aid as it battles to avoid default. A cabinet reshuffle is scheduled for today in the latest attempt to pass austerity measures there.
For the metals, the negative factors that unfold are further dollar strength, a lightening of risk appetite and the implications of slowing economic growth dampening industrial activity.
"It does not look good - they are trying to consolidate after the (Tuesday) shortcovering, but they're getting a little soggy on the charts," another trader said.
Traders added that this week's Chinese inflation data and subsequent monetary tightening has also soured the fundamental mood - China's central bank raised bank reserve ratios on Tuesday again - the ninth such increase since October.
"China doing that is obviously taking liquidity out of the market...and they won't be looking to buy copper at these levels," the first trader said.
COPPER WAREHOUSE STOCK FALLS CONTINUE, MORE TO COME
Copper eased back to $9,030 per tonne, down $124 or 1.3 percent from the Wednesday close, and showing signs of easing back under $9,000. In the spreads, July/August was holding at $1.00 backwardation.
Today, warehouse stocks fell a net 475 tonnes, taking the total to 472,150 tonnes. Meanwhile cancelled warrants - the metal earmarked for removal - rose 10,175 tonnes, or 63.5 percent, to 26,175 tonnes, the highest since January, mainly due to large warrantings in Chicago and New Orleans that reflect covering against North American physical commitments.
Aluminium traded at $2,558, down $33. Stocks fell a net 9,175 tonnes to 4,612,550 tonnes - the 16th consecutive daily fall - although cancelled warrants dropped 4,000 tonnes to 515,475 tonnes.
Zinc business at $2,213 was down $33 as well. Inventories, which hit a 16-year high of 868,825 tonnes in the previous session, saw outflows of 300 tonnes overnight. Cancelled warrants rose 2,575 tonnes, or 21.3 percent, to 14,650 tonnes. Lead traded at $2,490, a $28 loss.
Aluminium alloy stocks jumped 35 percent to 108,260 tonnes, the highest since March 2009, with metal warranted in Asia - there is a large short position in the market and a dominant long, which has seen the contango narrow.
Elsewhere, nickel business at $21,920 was down $130 - stocks fell to a fresh low since August 2009 at 111,744 tonnes following a 522-tonne outflow overnight. Tin was $450 lower at $24,700.
Steel billet was quoted at a steady $560/564, while in the minors cobalt and molybdenum were little changed at $35,500/39,000 and $35,000/37,500 respectively.
