MI Comment: Aluminium treads water on financial woes

On Monday morning aluminium stocks rose again and prices spent the day under pressure as Japanese consumers holidayed and fund/bank/broker types grew increasingly gloomy about ongoing woes in the financial markets. LME locals watched UK equities sink, led by banking stocks, as the run on the country's fifth-largest mortgage lender continued, beamed by 24-hour TV news channels straight into the City's dealing rooms. Those with money invested in riskier hedge fund products were no happier amid widespread reports of heavy losses in August. As such, confidence was seriously lacking ahead of today's expected US interest rate cut; though only the size of the cut was in question. Trading got underway tentatively, slipping from an initial high at 2437 to 2415. From there prices recovered to within a whisker of 2440 at the end of the premarket session, though with September's third Wednesday at Cash, brokers had selling and lending on their books. Outright prices bounced once again in the rings as they fell to 2411, though after regaining 2434 the weight of speculative selling proved too heavy in the afternoon and by the time dealers packed up the market had bottomed at 2389. Nearby contangos were unaltered with C-3m's interim spreads all linear and at full stretch, while forward lending as far as Dec 2011 saw rates beyond 3-months ease again. Up to the end of 2009, only Jun-Oct'09 remained in ($4.00) backwardation, while the anomalous tightening in H2 2010 of Friday was corrected. Rates here had jumped wider by up to $7.00/mth, as we reported yesterday, though in last night's closing evaluation they were slashed by up to $9.00/mth. So far on Tuesday morning prices had traded no higher than 2402 before slipping to lows currently of 2382. Trade buying continued to feature, though with the likes of Cliff Green Consultancy now looking to short the market after the break of 2400 -- with objectives c. 2200 -- further technical pressure was evident. Volumes were up on previous sessions, though with LME Select turnover at still no more than 2,000 lots at time of writing, it appeared many were keeping their powder dry ahead of the FOMC announcement later. Last at 2390.