Base metals extended losses during Wednesday morning LME premarket trading as a consistently gloomy macroeconomic global picture continued to paralyse sentiment across the financial sector.
The downbeat business sentiment reflected the continued lack of risk appetite as the imminent EU summit in Brussels later this week fails to offer much sense of a lasting solution.
“Confidence is low. There is a continued uncertain global economic picture and it may be some time before that changes,” a trader said.
The latest EU summit, which kicks off on Thursday, will see European leaders discuss specific steps towards a cross-border banking union, closer fiscal integration and the possibility of a debt redemption fund. But markets are pessimistic of a lasting solution to the long-running crisis.
“It’s like a sticking plaster for a broken leg,” the trader said of the prospect of lasting good coming from the forthcoming summit.
As well as bleak European sentiment, the other key economies – China and the US – offer little solace for global markets. Better than expected US housing data released yesterday seems to have had little positive impact coming from a stuttering economy, while China is looking to manage and moderate expansion – both of which do not bode well for industrial metals.
“I certainly foresee turnover remaining small and risk profiles being kept low as we continue to see downside pressure over the coming months. Demand is what’s going to lift this market back up,” the trader said.
The consistent factor of negative macoreconomic fundamentals and the approach of the slower third quarter will keep the short-term emphasis towards the downside, interspersed by bouts of bargain-hunting buying and covering.
Nevertheless, end-week metals business could well be choppy, as position tidying-up for the end of the month, second quarter and first half of the year takes place.
In other markets equities in Europe were steadier, while the euro was again little-changed against the dollar around 1.2490.
On the data side today, US releases scheduled include May durable goods orders and pending home sales.
Aluminium fell to a fresh two-year low for the fourth day in a row hitting $1,832.25 per tonne before settling at $1,845, unchanged from Tuesday’s close. Warehouse inventories saw their customary decline, falling a net 10,825 tonnes to 4,839,150 tonnes.
Prices are now well below the average cost of production – the market fell under the $2,000 level at the start of the month and has since lost eight percent in value.
“Whilst energy prices are weak and oil prices are weak, aluminium prices will remain weak – this will not change over coming months,” the trader added.
Copper was at $7,330, up from a session low of $7,307 but down from the previous close of $7,359. Inventories rose for the fifth day in a row, up 1,625 tonnes at a fresh two-month high of 254,875 tonnes.
Zinc sank to a new eight-month low of $1,745 before settling at $1,757.50, down $18.50 on Tuesday’s close. Stocks climbed 1,525 tonnes to 995,425 tonnes, a fresh high since April 1995. Lead dropped to $1,742, a new 11-month low, before settling at $1,754, a $14 loss. Stocks were up 475 tonnes at a one-month high of 351,250 tonnes.
Nickel traded at $16,258, down $17 – there was a modest six-tonne increase in stocks to 103,800 tonnes. Tin was at $18,450, down $110 on Tuesday’s close, while inventories dropped 10 tonnes to 12,240 tonnes. Steel billet was indicated at $385/410 – stocks remained static at 28,145 tonnes.
In minor metals, cobalt was quoted at $27,550/28,200, against Tuesday’s last trade of $30,200. Stocks rose four tonnes to 362 tonnes, the highest for nearly 13 months and close to May 2011′s record of 394 tonnes.
Molybdenum was neglected