Metals retreat with equities, investors pocket profits from mini-rally

Base metals fell back during Tuesday LME premarket trading, matching trends in wider financial and equity markets, where investor profit-taking has checked recent rallies, traders said.

After racing to early across-the-board multi-month highs on Monday and with US markets closed yesterday for the Independence Day holiday, the bias in the complex has tilted towards retracement and consolidation rather than upside extension.

“It is pretty uniform as all markets had a good run-up once Brexit became reality rather than a possibility. In metals, most of the business has been from the CTAs and momentum traders – there hasn’t been much from the industry, which is not a surprise going into summer,” a trader said.

“So, we were due a reaction – it just depends on how far it goes and there does seem to be some interest on the dips,” he added.

Short-term sentiment in metals has been boosted by increased risk appetite at the start of the second half and a perception that central banks in all regions will soon launch new stimulus measures to shore up liquidity and growth in the wake of the destabilising UK EU exit referendum vote.

In other markets, the FTSE 100 index was 0.6 percent lower around 6,480 while the dollar settled little-changed against the euro around an indicated 1.1150.

Economic data flow resumes today – there are widespread global services PMIs throughout the session. Already, China’s Caixin PMI data shows the country’s service sector picking up: the reading came in at 52.7, up from 51.2. In Europe, the Spanish, French and German readings for June were all as expected or better. The EU indicator was 52.8 against an expected 52.4.

Later today, there are figures on factory orders and economic optimism from the US and, additionally, the UK BoE stability report and statement from the British central bank’s governer has the potential, given the aftershock of the Brexit vote, to affect wider financial markets. From mid-week onwards, attention will turn towards the US employment scene, building up to Friday’s non-farm payrolls figures for June.

For the metals, trends later today will be influenced by the post-holiday reopenings in the US as well as positioning ahead of Wednesday’s July traded options expiries.

In the metals, copper, which peaked at a two-month high of $4,960 on Monday, was trading at $4,837 per tonne, down $56 on Monday’s close, with today’s warehouse inventory data also having a negative impact. Stocks jumped a net 10,525 tonnes to a three-week high of 198,925 tonnes due to a hefty 11,150-tonne warranting in Singapore.

Aluminium drifted away with the pack to $1,639, a $10.50 loss – on Monday prices hit $1,672, also the highest for two months. Inventories fell further, down 6,825 tonnes at 2,368,250 tonnes, the lowest since early-January 2009.

Nickel remained lively following Monday’s surge to a nine-month high of $10,410, swinging either side of $10,000. Business ranged down to $9,755 before prices settled at $10,040, a drop of $155. Inventories declined another 1,266 tonnes to 376,848 tonnes, a fresh low since late-October 2014.

In others, tin trade at $17,800 was $225 lower – on Monday prices surged rapidly to $18,125, a level not seen for 16 months. Stocks, meanwhile, held unchanged at 6,050 tonnes, around their lowest for two months.

Zinc, having corrected lower from a 13-month best of $2,186.50, traded recently at $2,102, a $14 decline, with stocks down 350 tonnes at 441,750 tonnes. Lead trade at $1,823 was $23 lower – yesterday prices reached $1,882.50, a four-month best. Its stockpile also fell 350 tonnes to 184,800 tonnes.

Steel billet, cobalt and molybdenum were all neglected. There was a one-tonne drop in cobalt stocks to 644 tonnes.

(Editing by Mark Shaw)