Dubai market powers base metals

Base metals closed in positive territory yesterday, bid higher in early Asia trade, assisted by a much weaker US dollar. However, news that Dubai World, the Dubai-based company and owner of some flagship property developments in Dubai and other parts of the world, has asked for its credit payments to be frozen by six months, caused risk appetite to beat a quick retreat. All commodities then pushed lower. While copper broke through and traded above $7,000 a few hours, its failed to consolidate. After a high of high of $7,060 early this morning, copper is finding support at $6,900. There has been decent selling out of China with copper above $7,000. We maintain the Chinese market remains well supplied (reflected in the Shanghai forward curve). Given the heightened risk aversion and with the US on holiday today, we doubt the metal would find enough support to break above $7,000 again this week. We expect $7,000 to hold. While aluminium edged higher yesterday, it did not approach $2,100 or consolidate above $2,050. But, we are keeping our eye on crude oil. Crude oil has been range-trading between $75 and $80 for some time now. We expect a breakout soon. While crude oil might break out either direction, we favour the upside (based on our dollar view as well as growing liquidity). Crude breaking upwards could see aluminium break above $2,100. Zinc has pushed lower, with the rest of the metals. However, it has found some buying support around $2,270. Lead is still trading well above $2,360 despite the sell-off this morning, while nickel is holding firm at $16,800. We expect volumes to be low today and tomorrow, and erratic price movements. Watch out for Eurozone data releases (consumer confidence, economic confidence and industrial confidence) tomorrow morning. As trading volumes are low, data might exacerbate metals’ price moves.