LME MORNING – Base metals off highs but remain up-beat, tightness supports

Base metals were off session highs in Friday’s LME premarket but sentiment remains upbeat following a week of generally higher prices.

Sentiment has been bolstered by wider financial market gains, constructive US economic figures on Tuesday and Wednesday and some fresh investment interest after the late-morning March traded options expiries.

“Base metal prices for the most part have taken off this week due to technical breaches of key moving averages. This, coupled with prevailing spread tightness, has helped boost prices,” a trader said.

“Whether the move can be sustained remains to be seen. If setbacks can find buying then we could be entering a period of strength, which could bring the feel-good factor back,” he added.

There is growing speculation as well that China will extend it stimulus measures in a bid to stem slowing growth. China’s National People’s Congress is set to meet this weekend to form its five-year development plan, which will outline how it plans on grappling with a slowing economy, jittery equity markets and a major outflow of capital.

In equities, the FTSE opened higher, up 0.38 percent at 6,153.65p. The miners are in positive territory – Glencore was up 4.62 percent at 149.60p, Anglo American was 4.54 percent higher and Rio Tinto was up 2.34 percent.

The economic agenda will be focused on today’s US employment report. The market is expecting 195,000 new jobs and an unemployment rate of 4.9 percent. The US trade balance data is also out today.

Earlier, the EU retail PMI was as expected at 50.1.

In the metals, copper at $4,893 per tonne was up $38 on Thursday’s close but down from the session and November high of $4,933. Business has been robust – more than 11,000 lots have changed hands on Select so far.

Stocks fell a net 1,0252 tonnes to 186,700 tonnes and cancelled warrants increased 1,675 tonnes to 48,025 tonnes. On-warrant material at 138,675 tonnes is now at the lowest level since November 2014. SHFE stocks at 305,106 tonnes have eclipsed LME inventories.

Spreads were tight, with cash/threes at a backwardation of $10.75.

Aluminium continues to encounter resistance ahead of $1,600 – recent trade at $1,578 was up just $1. Stocks climbed 6,325 tonnes to 2,798,250 tonnes, with Singapore inventories rising 12,000 tonnes. Cancelled warrants fell 8,650 tonnes to 613,850 tonnes.

Spread tightness continued to dominate sentiment. The sensitive ‘Tom’/Next spread was last at a backwardation of $2 while cash/threes was at $16.25 – the March date is keeping things interesting with a backwardation of $21.

Nickel is holding above $9,000 for the first time since December – at $9,010, it was $10 higher. Stocks fell 6,264 tonnes to 431,874 tonnes and cancelled warrants lost 5,250 tonnes to 147,096 tonnes.

Lead is unchanged at $1,838. Stocks and cancelled warrants both declined 1,500 tonnes to 208,425 tonnes and 95,875 tonnes respectively. It cash/threes was last at a backwardation of $4 while ‘Tom’/next has also tightened to a small backwardation of $0.20.

Tin at $16,595 was its strongest in almost 11 months – it peaked at $16,645 earlier today. Inventories were unchanged.

Steel, cobalt and molybdenum were neglected. Steel prices have fallen to a contract low at $65/100 due to an adjustment in an out-of-line contract that has been illiquid and ignored for months.

(Additional reporting by Ewa Manthey, editing by Mark Shaw)