By: William Adams London 27/07/2011 - The base metals put in a strong performance on Tuesday with average gains of 1.5 percent, zinc led the advance with a 2.4 percent gain to $2,524, copper was up 1.7 percent at $2,840 and aluminium was 1.1 percent higher at $2,643. Dollar weakness remained an issue and what is noteworthy is that the metals held up despite generally poor economic news and weaker equities – this suggests industrial commodities are attracting some safe-haven buying. Copper is also benefiting from the strike at Escondida and on concerns that this might spark further labour unrest. This morning the metals are on average 0.5 percent firmer, although copper is unchanged at $9,843. Aluminium is up the most with a 1 percent gain to $2,670 and lead is up 0.8 percent at $2,740. Volumes are slightly lighter than yesterday at 4,270, with 1,446 lots of copper traded compared with 2,421 lots this time yesterday. The dollar remains under pressure, the low on the dollar index this morning has been 73.41, which takes it below the previous low from 7th June at 73.50. This opens the door to further dollar weakness and judging by the stalemate over US debt ceiling the dollar may well head off lower in the short term. Bullion prices have climbed further suggesting continuing concern over the plight of the dollar. The currencies are strong, the Aussie has hit 1.1050, the euro is at 1.4500, the pound is at 1.6410 and the yen is at 77.65. Equities – the Dow closed down 0,7 percent and this morning Asia is looking mixed with the Nikkei down 0.5 percent, no doubt the stronger yen is not helping exporters. The Hang Seng is up 0.25 percent, the MSCI Asia Apex is little changed, while China’s CSI 300 index is up 0.7 percent. So a mixed picture overall. In Shanghai the October contracts have seen a similar rise to yesterday’s LME performance, with average gains of 1.6 percent. Aluminium lead the way with a 2.4 percent rise, followed by zinc which is up 1.7 percent at Rmb 19,100, lead is up 1.2 percent at Rmb 17,900 and copper is up 0.8 percent at Rmb 73,000. However, the run up on the futures looks increasingly speculative as spot copper in Changjiang climbed just 0.2 percent to Rmb 71,800-72,050, which shows the contango is rising again. The LME/Shanghai arb remains closed at negative $190/tonne. The economic agenda will focus on US durable goods orders, although German CPI and later this evening the Beige book are likely to be watched closely. See table on right for more details. The outlook for the base metals is mixed. The charts and specific situations like the strike in Chile, power shortages in China and the tightness in aluminium, are helping to support prices, as indeed is the weaker dollar. However, the broader economic and financial situations, suggest that demand may get weaker before it gets stronger again. As such, we would be wary of these rallies and would expect pull backs along the way. Indeed a rebound in the dollar may well be enough to trigger such an event. LME Overnight Performance 7:19 AM +/- +/- % Lots Cu 9849.5 9.5 0.1% 1446 Al 2670 27 1.0% 1339 Ni 24225 75 0.3% 97 Zn 2532 8 0.3% 1226 Pb 2740.75 21.5 0.8% 139 Sn 28650 190 0.7% 23 Steel Med 600 0 0.0% Economic Agenda Time Country Data ACTUAL Expected Previous 7:00am EU

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