Just as it looked like the sky was falling in on the base metals complex on Thursday, the markets turned on a sixpence and powered back up in a spate of short-covering. A single reason for the change of heart wasn’t easily apparent, though for aluminium the combination of surprisingly strong US retail sales and an expected slowing in Chinese exports helped turn the tide. Having bottomed in the premarket at 2658 prices recovered as CTA selling receded and after regaining 2700 in the afternoon, they sprinted to a high of 2722 in the pm kerb.
As outright prices tumbled in the premarket locals reported large-scale lending interest too, though following the afternoon’s reversal rates ended little-changed nearby. Forward backwardations had been offered in too intraday, though as at closing evaluation time movement ended mixed. H1 2008 softened by up to $3.50/mth, though from there to mid-2011 spreads were marginally tighter, with H2 2011 easing by $1.50/mth.
In overnight (Wed/Thu) trading Shanghai followed through in one of the busiest sessions seen for some time, though LME Select registered one measly lot of business ahead of London’s reopening. As dealing got underway proper the light metal was quickly marked up to 2730 before slipping somewhat in a routine session, with only 1,500 lots changing hands electronically in the premarket. China’s unexpectedly strong industrial production growth bode well (short-term) for metals consumption there, though the figures would also put more pressure on its government to tighten fiscal policy. In the mean time, heightened labour tensions in Latin America were underpinning copper, though with the dollar/yen at 4½ year highs aluminium was struggling to climb further.
Cliff Green Consultancy in a report put ‘strong resistance’ c. 2760/70, with a break above 2840 now required to negate short term downward trends, the trading strategists suggested. One local commentator was more sanguine, however, suggesting that with the largest speculative short position in over a year having built up, the market looked primed for a rally… Last at 2720.
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