Base metals down as rising stocks hit sentiment

LONDON, Oct 17 - London Metal Exchange copper fell by nearly 1 percent on Wednesday and lead was down by over 2 percent as rising stocks dampened sentiment. "Lead continues to be weak, especially with another large increase in LME stocks," analyst Leon Westgate at Standard Bank said. "Copper is also being hurt by steadily increasing stocks." Copper for delivery in three months dropped $65 or 0.8 percent to $7,970 a tonne by midsession, after a 1.4 percent fall in the previous session. "Longer term we still feel positive towards the metal, but nearby it looks weak (technically)," Westgate said. Three-month lead futures fell $86 or 2.4 percent to $3,555/3,560, following Tuesday's 4 percent slide on profit taking following a sharp rise in stocks. It hit an intraday low of $3,450 earlier, down 5.2 percent. "There was some heavy CTA (Commodity Trading Advisor) selling in lead," an LME floor trader said. "They also sold off copper, but copper sees fairly strong support at $7,900 and it has come back a bit since," he added. On Wednesday, lead stocks rose for a second consecutive day by 3,775 tonnes to 29,700 -- the highest since mid-August -- and up by 30 percent since its recent low on September 24. Zinc also narrowed earlier losses, it hit an intraday low of $2,915, before trading at $2,970, down $75 from Tuesday. Mining equities weighed on the London Stock Exchange with the FTSE 100 .FTSE index of Britain's leading shares trading up 0.92 percent. Rio Tinto dropped 2.56 percent after reporting a fall in third-quarter mined output. Base metal prices suffered as sentiment became nervous on the back of equity weakness and some carry trades being unwound, analyst William Adams at BaseMetals.com said in a report. "However, we continue to like the fundamentals and feel that overall robust global demand will draw down stocks across the metals, and with low stocks and restricted supply, prices will continue to head higher overall," Adams said. China imported 124,021 tonnes of refined copper and copper alloy in September, up 18 percent from 104,838 tonnes in August. Imports in the first nine months reached 1.34 million tonnes, up 91.3 percent from a year earlier.[ID:nBJE000010] Stockpiles of copper in LME warehouses rose 2,600 tonnes to 143,125 and stocks have risen by about 13,000 tonnes this month to their highest since May. Traders believe much of the material may be metal originally destined for Chinese consumers that is being redirected to LME locations in Asia to take advantage of strong international prices. In addition to the stock rises, warnings by Fed chairman Ben Bernanke that the housing slump could extend into the longer term and a weak reading for the National Association of House Builders housing market index dented sentiment. Traders will be watching out for U.S. housing starts data for September and U.S. consumer price index figures due at 1230 GMT for further clues about the U.S. economy. Aluminium fell $8 to $2,490, tin shed $100 to $16,400 and nickel lost $100 to $31,600. In industry news, Anglo-Swiss miner Xstrata Plc (XTA.L: Quote, Profile , Research) has approved the development of the Koniambo nickel mine in New Caledonia and will fund most of the $3.8 billion investment planned for the project.