LME Metals Up A Tad In Asia; Sentiment Firms

SINGAPORE--London Metal Exchange base metals edged higher Wednesday, and further gains are expected this week, as sentiment firmed on overnight LME gains and most of Asia's stock markets strengthened for a second consecutive day.

Three-month LME copper broke the important $6,000 per metric ton psychological resistance, and was up $45 from the London Tuesday afternoon kerb at $6,005/ton as of 0707 GMT.

Stock markets appear to have stabilized, analysts said, so the outlook for global economic growth and therefore for base metal demand hasn't been dented by losses in the past week.

"The shakeout we've had is just that, shaking out nervous money and getting out people who've been overly speculating," said the head of metals at an international trading house in Singapore. "I think the market will claw its way back to where it was a couple of weeks ago."

Since the Shanghai Stock Exchange dropped 9% on Feb. 26 and sent shockwaves through global financial markets, LME base metals have fallen by about 5% on average. Zinc has lost the most at almost 10%, followed by aluminum at about 7%. The flagship three-month copper futures contract is down 4.5%. Tin has fallen the least at just under 1%.

Light buying from physical consumers helped push prices higher today, a trader at a Japanese trading house said. While he doesn't think base metals are poised for sharp gains, the mood has improved from recent sessions.

"There is a feeling that (the metals) are trading within range," he said. "They may be close to the bottom of the range and people are urged to buy at these levels."

Despite the firmer sentiment, the complex remains sensitive to equity market movements in the short-term. An afternoon fall in Japan's Nikkei index and a stronger yen sent gold prices in Asia lower, and may weigh on base metals as well.

The strengthening of the yen suggests there may be more unwinding of yen carry-trades ahead, which are believed to have led to some selling of base metals.

As of 0707 GMT, the three-month aluminum contract was up $1 at $2,695/ton. Traders said today's options strike declarations had the potential to push prices higher, but most discounted the likelihood of a jump to $3,000/ton.

With prices well below $3,000, it's unlikely that traders who are short of options will be forced to cover heavily, said the Japanese trader.

The three-month nickel contract was unchanged at $40,400/ton, while tin was up $25 at $13,300/ton, and lead was unchanged at $1,820/ton.