Copper, aluminium sink on financial woes, stocks

LONDON, Sept 16 (Reuters) - Copper hit an eight-month low on Tuesday as investors worried global financial turmoil would cut demand, while aluminium fell on a big jump in LME stocks. 'The market is under pressure and sees further liquidation ... people are looking to hold onto cash and commodities have suffered from that as they are relatively easy to buy and sell,' said Standard Bank analyst Leon Westgate. 'All markets are linked to each other which makes things like Lehman going under much more worrying -- you wonder where the next weak link in the chain is,' he said. Copper for delivery in three months on the London Metal Exchange was down at $6,820 a tonne at 0944 GMT compared with $6,930 at the close on Monday, when it shed 2.7 percent. It hit a fresh eight-month low in early trade at $6,720 -- the lowest since January 22. 'Metals prices are falling further today as the market awakes to an ongoing 'credit crisis', ongoing 'uncertainty' and a 'lack of confidence' in markets in general,' investment bank Fairfax said in a report. Oil prices and gold also fell sharply and the Reuters-Jefferies CRB Index, a global commodities benchmark, neared nine-month lows on Monday. Concerns about oversupply weighed on aluminium as energy prices waned, opening the gates for more Chinese capacity start-ups. LME aluminium fell $25 or 1 percent to $2,542, after sliding 3.7 percent on Monday. The light metal hit $2,525 earlier -- the lowest since Jan. 29 after a hefty stock rise, up 55,075 tonnes to 1.24 million. The warehouse in Baltimore received 52,400 tonnes and traders speculated which market player was raising cash, perhaps to cover margin calls for losses in other markets. GLOBAL TURMOIL 'The big focus is on the stock market,' Westgate said. European shares fell as global equities continued their slide amid turmoil in the financial sector, which led losers after a debt downgrade for American International Group (nyse: AIG - news - people ). The FTSEurofirst index of leading European shares was down 1.08 percent, following a 3.6 percent slide on Monday after Lehman Brothers (nyse: LEH - news - people ) filed for bankruptcy protection. Markets in China, Japan, South Korea, and Hong Kong reopened after holidays and quickly followed falls in New York, where the Dow Jones industrial average saw its biggest drop since the September 11, 2001 attacks. The London Metal Exchange said on Monday it had declared Lehman a defaulter and suspended it from electronic trading. 'The market is still digesting the Lehman news ... and then whatever the Fed does tonight that is going to set the tone for the rest of the week,' Westgate said. Markets are pricing in an 80 percent chance that the Federal Reserve will pare 25 points from interest rates when it meets at 1815 GMT. Overnight China's central bank tried to soothe domestic markets with an unexpected cut in interest rates, the first since February 2002, and also reduced the reserve ratio. 'The Chinese appear to have switched from wanting to control inflation to focusing on growth,' Westgate said. 'Either the Chinese economy is starting to misfire ... or the Chinese are now looking to ease some of the monetary tightness and you might see Chinese growth continue at current levels rather than drop away,' he added. Last week, Shanghai copper inventories fell almost 30 percent to 13,554 tonnes, or just over one day of Chinese daily consumption, boosting nearby prices. The premium for Shanghai's third-month copper futures versus the London benchmark, including China's 17 percent value-added tax, widened to 121 yuan from 73 on Friday, having earlier reverted to a discount. The difference flipped into a premium on Sept 9. Zinc was at $1,748, down $22, lead shed $48 to $1,802, nickel fell to $17,850, down $255 and tin was lower at $18,550 against $18,900/18,910 on Monday. Metal Prices at 0958 GMT Metal Last Change Pct Move End 2007 Ytd Pct move LME Cu 6817.00 -113.00 -1.63 6670.00 2.20 SHFE Cu* 53930.00 -2530.00 -4.48 56880.00 -5.19 LME Alum 2540.00 -27.00 -1.05 2403.00 5.70 SHFE Alu* 16060.00 -715.00 -4.26 18180.00 -11.66 COMEX Cu** 309.70 -8.70 -2.73 303.50 2.04 LME Zinc 1749.00 -13.00 -0.74 2370.00 -26.20 SHFE Zinc* 13780.00 -720.00 -4.97 18950.00 -27.28 LME Nick 17850.00 -255.00 -1.41 26350.00 -32.26 LME Lead 1802.00 -48.00 -2.59 2550.00 -29.33 LME Tin 18550.00 -350.00 -1.85 16400.00 13.11 ** 1st contract month for COMEX copper * 3rd contact month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Additional reporting by Nick Trevethan, editing by Michael Roddy) Source: Thomson Financial