Metals prices got some lift on Wednesday, by the close they were up an average of 1.3 percent, although the readings were skewed by lead climbing 3.3 percent to $2,530, while copper struggled -it closed up 0.2 percent at $9,065. Driving lead was a further large cancellation of warrants in Singapore where 21,475 tonnes were cancelled. With lead battery production in China being affected by government inspections, it may be that battery manufacturer in other regions in Asia are ramping up production, although the scale of the cancellations in recent days suggests other things are happening as well. However, our overall view is that the metals remain in down trends and that rallies are likely to be sold and this has happened again overnight following the FOMC statement. The Fed said growth was slower than expected and gave no hint of any QE3, which led to a firmer dollar but dampened sentiment. As such, the metals are down an average of 1 percent this morning with nickel leading the decline with a drop of 1.5 percent to $22,065, copper is down 1 percent at $8,975 and aluminium, lead and zinc are off by around 0.8 percent, see table on right. Volumes have also been higher into the price weakness with total volume of 5,926 lots as of 07:17 BST compared to an average earlier on in the week at around this time of 3,584 lots. In Shanghai the metals are mixed, copper is down 0.7 percent at Rmb 67,120, aluminium is up 0.1 percent at Rmb 17,025, zinc and lead are up 0.4 percent at Rmb 17,320 and Rmb 16,825 respectively. What is surprising is that the metals have held up in the face of poor data. HSBC’s reading of China’s flash manufacturing PMI dropped to 50.1 from 51.6. This is getting very close to the 50 divide between expansion and contraction. The dollar has firmed with the dollar index climbing back above the 751evel, last at 75.11 after recent lows around 74.50. The euro is back below 1.4300, at 1.4295, the pound is weak at 1.6050 – it weakened yesterday when the Bank of England’s minutes mentioned they had discussed the possibility of doing more quantitative easing. The aussie is weaker at 1.0550 and the yen slightly weaker at 80.45. Bullion prices have also eased in line with the stronger dollar. Equities – the Dow dropped 0.7 percent and the weaker tone has flowed trough to Asia where the Nikkei is down 0.3 percent, then Hang Seng is down 0.7 percent, the MSCI Asia Apex is down 0.6 percent, although China’s CSI 300 index is surprisingly up 1 percent. The economic agenda is busy today with PMI data out across Europe, initial jobless claims and new home sales in the US - to mention a few, see table on right for more details. Plus the EU economic summit gets underway and President Trichet is talking at 5pm BST. Given the less than bullish words from the Fed, the end of QE2, the EU debt debacle, further evidence of slower growth in China and the approaching summer slowdown, we feel the markets are likely to remain under pressure, especially if the dollar starts to climb again. Attention today is likely to be focused on the EU.

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