MI Comment: Cluck cluck

In the banking world’s homogeneous grey dealing rooms, in which highly-paid battery hens trade in anything from the most exotic credit derivates to pork bellies, sentiment is everything. With the financial world still in turmoil over the poor state of the world’s largest economy on Thursday, stock markets tumbled and dragged everything else with them. Equities suffered the greatest loss yesterday, sucking commodities with them even though the two asset classes are anything but inextricably linked. As we signed off yesterday aluminium had slipped from 2788 to test nearby support located c. 2760, where it was finding healthy trade buying. World stocks of the light metal had fallen to their lowest level since records began in 1973, the IAI reported, though this statistic combined with the presence of key moving averages was unable to sustain prices there. Headlines that US new home sales had fallen sharply in June weren’t unexpected, though they followed on the heels of a weaker German Ifo index and heightened fears over today’s US Q2 GDP advance estimate. Precious metals took the brunt of the subsequent sharp fall in share prices, though aluminium inevitably traded lower in the afternoon, bottoming at 2730 in the pm kerb. The C-3m spread lost a weekend’s worth of contango, while forward backwardation held steady, gaining $0.50-$1.00/mth in places. Dec’08-Jun’09 gained a little more, having been marked in too much in the previous day’s closing evaluations. A 30-40% holding had reappeared in yesterday’s LME WC warrant banding report, though in this morning’s update the report was again clear. On Friday morning it looked like metals traders were regaining a mind of their own, with bargain hunting setting in as a stronger yen sparked interest from Asian consumers. Ahead of the London opening another lively session saw 480 change hands via Select and aluminium prices recovered to 2760 in the early hours of trading. Up to the end of the premarket the electronic tally had risen to a high 4,500 lots as prices slid to lows of 2712 and bounced to 2745. Technical support had been expected down there, though a clear break beneath 2710 could see more serious downward pressure towards 2660, wrote Cliff Green Consultancy last night. Last at 2740, nervously awaiting more macro news from the US of A this afternoon.