The metals put in a relatively quiet day to start with on Tuesday, but then found some upward momentum as the afternoon progressed. Having started in negative territory, prices went on the close up 1.2 percent, led by tin that rose 2.9 percent and aluminium that climbed 2.2 percent – its rise countered its rather weak performance from last week and on Monday. Interestingly the firmer tone in the metals happened despite a firmer dollar. Overnight the metals have trod water, on average they are down just 0.1 percent as of 07:07 BST, tin has pulled back the most with a 0.7 percent drop to $26,350, zinc is down 0.4 percent at $2,400, copper is down 0.2 percent at $9,525, while aluminium is up 0.4 percent at $2,580. Volumes have been average with 4,500 lots traded, with 2,082 lots of copper traded. Overnight the main news development is that Moody’s Investor Services have cut Portugal’s credit rating by four levels to Ba2, two notches into junk territory. The rating agency now thinks there is a greater risk of the country will need a second bailout. This raises the concerns of contagion, but so far the news has not had too much impact on market performance. Equities – the Dow closed down just 0.1 percent yesterday, the Nikkei is up 0.8 percent, the Hang Seng is down 0.4 percent the MSCI Asia Apex is little changed while China CSI 300 index is down 0.9 percent. The dollar is slightly firmer with the dollar index at 74.53, the euro is holding up relatively well at 1.4455, the aussie is at 1.0730, sterling is at 1.6055 and the yen is firmer at 80.90. Gold and silver have reacted overnight they are firmer at $1,517 and $35.87. In Shanghai the September contracts are up an average of 0.4 percent, aluminium and zinc are up 0.5 percent at Rmb 17,405 and Rmb 18,145, copper is up 0.4 percent at Rmb 70,680 and lead is down just Rmb 5 at Rmb 17,275. Spot copper in Changjiang is up 0.3 percent at Rmb 70,580-70,800, so remains either side of the futures prices, but the run up in LME copper prices has meant the arb window is firmly shut again with imported LME copper at a $260/tonne premium to local prices. The economic agenda is fairly busy, UK shop price inflation picked up to 2.9 percent and Japanese leading indicators climbed to 99.8 percent. Later we get UK house prices, EU GDP and German factory orders, plus the start of the US jobs data with Challenger job cuts and ISM non-manufacturing PMI, see table on right for more details. The base metals are in an interesting space, sentiment does seem to have turned more bullish and that suggests the relief rally from last week is attracting follow through buying with the market seeing the February to May price pull back as being overdone. However, the situation in Europe remains a concern, maybe the market is seeing the EU debt as too big to fail and is taking comfort from that, but we would say that reeks of complacency. Indeed the fact that the dollar is holding firm and precious metals are rising shows some pick-up in concern and we would not be surprised if that had negative implications for equities and the euro. However, supporting equities and the euro in the near term may well be the approach of earnings season and tomorrow’s ECB interest rate decision. On balance we still view the rebounds in the metals as counter trend moves and as such would be on the look out for prices to pull back before too long.

Source