London 16/08/2011 - Base metals fell in LME premarket trading on Tuesday when weak GDP figures out of the eurozone raised concerns that the region's economic health is deteriorating. Copper dipped below $8,800 per tonne - it is now hovering around that level, with evidence of arbitrage buying in China offsetting some of the negative impact from weak financial markets. Aluminium showed resilience as well amid technical buying but lead, zinc and tin were all lower. Nickel bucked the downtrend to trade slightly higher. "The outlook is uncertain with the probable view that the markets really do need to consolidate in and around current levels for the coming days," broker Sucden said in a report. This morning metals generally took their cue from weaker equity markets - down around one percent - and a softer euro following worse-than-expected growth figures from the eurozone. Germany's GDP rose 0.1 percent in the second quarter, below a forecast of 0.5 percent and down from 1.3 percent in the first quarter. Preliminary GDP data for the EU came in at 0.2 percent for the quarter, also below expectations, while Spain's economic growth only just met expectations at 0.2 percent. These bearish numbers "raise more questions about Europe's growth prospects," FastMarkets analyst Jono Remington-Hobbs said, adding that Europe-wide austerity is "starting to lower GDP growth potential in the bloc." Caution also prevailed ahead of a Franco-German meeting later today, with investors waiting to hear what other measures could be taken to address the eurozone debt crisis and prevent contagion to the region's biggest economies. All eyes will be on a joint news conference by French President Nicolas Sarkozy and German Chancellor Angela Merkel at 1700 BST. Other data on the agenda includes US building permits, housing starts and industrial production. Trading should remain choppy in the coming weeks, with prices likely to stay largely rangebound until demand picks up in the fourth quarter, according to Michael Widmer of Bank of America/Merrill Lynch. "By and large, we haven't moved much over the past six months in base metals [and] we're unlikely to establish a new trend during the summer unless demand starts to pick up," he said. OPEN ARBITRAGE WINDOW CAPS COPPER’S DOWNSIDE Copper dropped as low as $8,783 per tonne before settling back nearer $8,800 at $8,796, down $113. It rose above $8,950 overnight when Chinese buying was reported on the re-opening of the LME-SHFE arbitrage window. The LME recorded a discount of $55-130 per tonne compared with the SHFE price when taking into account freight, VAT and currency rates. This encouraged Chinese investors to buy LME material and sell Shanghai, while pushing physical premiums higher. But copper remained undermined by the financial turmoil as well as bearish inventory data. LME-registered stocks rose a net 4,675 tonnes from what was their lowest level for four months to reach 465,275 tonnes. But cancelled warrants, the metal earmarked for removal, rose 3.8 percent, indicating that stocks declines may soon resume. In other metals, aluminium was effectively flat at $2,378, up $3 - technical buying continued to cap the downside. Stocks jumped 21,675 tonnes due to a large warranting in Detroit in another episode of the current warehouse war. Lead stocks also recorded a large increase following a hefty warranting in Singapore - the headline figure rose 10,925 tonnes or 3.5 percent to 319,225 tonnes, their highest level since June 30. Prices were down almost two percent or $45 at $2,353. Zinc fell $23 to $2,160 even though stocks dropped a net 1,700 tonnes. Zinc could also benefit from arbitrage buying in China at some point as the window is also opened, favouring imports, traders said. Tin was $500 lower at $23,900 but nickel bucked the trend, gaining $115 to $21,415. Steel futures were quoted at $565/570 per tonne, unchanged from the previous day, while stocks rose 715 tonnes to a fresh high since May 11 at 53,365 tonnes. Cobalt and molybdenum were neglected.

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