LME MORNING – Base metals stumble, sentiment sours amid economic uncertainty

Base metals got off to a damp start on Tuesday, maintaining their downward trend and hitting fresh lows in some – zinc was back at June 2010 lows, tin its lowest since the start of the month and copper at a fresh two-week low.

“This is a level prices seem to be comfortable with. There are short-covering rallies that come in but they don’t last and there is no reason for prices not to reverse,” a trader said.

Forecasts-beating data from China failed to provide any lift – the CB leading index was at 4.7 percent and the trade balance was $2.87 billion.

In equities, the Shanghai composite was last at 3,185.62, up almost one percent, but concerns that China faces a hard landing continue to unsettle markets. Caixin flash manufacturing PMI will be eyed with interest.

Elsewhere, European equities were also under pressure, with the FTSE 100 down 1.87 percent to 5,995.05.

In currencies, the euro fell to close to two-week lows against the dollar after several Fed officials said they were “confident” that interest rates would rise this year. It has since recovered to a barely changed 1.1190.

In the metals, copper dropped under $5,200 to last trade at $5,136 per tonne, down $133 on Monday’s close. More than 8,000 lots have changed hands on Select so far.

In the spreads, cash/Oct is now at a contango of $3, while the benchmark cash/threes is at a backwardation of $8. Stocks fell a net 5,750 tonnes to 330,100 tonnes and cancelled warrants dropped 2,425 tonnes to 63,775 tonnes.

Nickel at $9,765 was down $100 even after global stocks at 452,694 tonnes were down 1,628 tonnes and cancellations jumped 21,846 tonnes to 182,082 tonnes, a move centred on Johor.

Aluminium fell $20 to $1,586. Stocks and cancelled warrants both dropped 8,425 tonnes to 3,216,000 and 1,119,075 tonnes respectively. Pockets of tightness remain: Oct/Nov, Oct/3-mth and Dec/3-mth are at backwardations of $11, $5.25 and $1.50 respectively.

“The main tightness sits between the October date and the end of the month. It is noted that the long has been lending good-sized clips, however,” Triland said.

Lead at $1,685 was down $21. Following yesterday’s 24,825-tonne jump in cancelled warrants, stock movements were routine today – inventories slipped 325 tonnes to 165,125 tonnes and cancelled warrants nudged 175 tonnes higher to 44,700 tonnes. The December/3-month spread is now level, having been backwardated yesterday.

Zinc at $1,635 was $22 lower after 3,200-tonne falls in stocks and cancelled warrants to 602,475 tonnes and 77,525 tonnes respectively.

Tin dropped to $14,870, a $275 loss and its softest since September. The backwardation in its cash/threes ticked lower to $84.

Steel, cobalt and molybdenum were neglected, with no changes to stocks.

(Editing by Mark Shaw)