Metal prices under pressure, further losses expected as outlook darkens – LME MORNING

Base metals prices headed lower during Thursday LME premarket trading, with some follow-though liquidation seen after the previous session’s sell-off, as a worsening fundamental picture impinged on the mood.

“It is more of the same – [markets] have broken down on the charts so there is investment money coming out of them,” a trader said.

There has been a sharp downshift in sentiment this week, traders added, as well as a flight from risk assets in general. With technical signals also negative, momentum will be towards the downside, interspersed by bouts of covering and bargain-hunting buying.

Concerns over weak demand continue to pervade, with weakness likely to persist until signs that the supply side is reacting… Low inflation in China and the US [is] sparking demand concerns,” broker ANZ said.

Global economic prospects have deteriorated markedly in recent days, with signs of weakening in the US, a slowdown in China and a looming recession in Europe.

Today, wider market attention will be on the economic newsflow – eurozone consumer prices this morning before US figures on industrial capacity and utilisation this afternoon, as well as weekly employment claims and the Philly Fed manufacturing index.

In other markets this morning, European stock markets stemmed declines, helping to hold metals above their lows, although attention will be on US equities later. The dollar stood around a steadier 1.2795 against the euro.

“I the rout in equities does not continue today, the metals will pick up some bargain-hunting, we feel,” William Adams of FastMarkets said.

But below-par outturns in the US data-stream could well spark end-of-session volatility in the metals complex.

Copper, at a three-week high price of $6,825 just two days ago, averted a test of levels near $6,600 – the early-October lows. It traded at $6,626 per tonne, a $19 loss from the previous close. Warehouse stocks rose for the fourth day this week – up a net 3,025 tonnes at 157,675 tonnes, with metal warranted against tightness.

The short squeeze, which gripped the market at the start of the week, has unravelled to a great extent, although the cash/threes spread stood around $43/45 backwardation.

Nickel continued to struggle near its lowest levels since late-March –  business at $15,635 was down $195 in price, although inventories fell 372 tonnes from what were all-time highs to 374,562 tonnes.

“Nickel has broken its October lows and looks likely to be heading further south in coming sessions,” LME RDM Triland Metals said.

In others, aluminium was $3 higher at $1,923, holding for now above early-October lows around $1,900. Inventories dropped 9,425 tonnes to 4,526,050 tonnes, the lowest since August 2011.

Lead briefly spiked down to $1,985.25, the lowest for 17 months, and then moved back to $2,000, still down $8.50 – there was a modest 25-tonne increase in stocks. Zinc was $29.50 lower at $2,248 even though stocks were down 1,625 tonnes at a two-month low of 724,775 tonnes.

The tin price was trading at $19,599, down $11 and struggling near 15-month lows – inventories were unchanged. The minor metals were neglected but a 12-tonne increase in molybdenum stocks lifted the total to a six-month high of 132 tonnes.

(Editing by Mark Shaw)