MI Comment: Aluminium waltzes higher

A small drop in LME aluminium stocks grabbed the headlines on Thursday morning, helping to lift prices through the 30-day moving average c. 2477 shortly after the opening. Before we signed off yesterday 3-month values had peaked in the premarket at 2516.50 after which things quietened down. Zinc was the morning's strongest performer, seeing some serious upward corrective movement fuelled by a still-lagging supply of refined material, though aluminium was more closely tied to copper. Dollar weakness and positive German employment data spurred the pair on in the am sessions, with the light metal reaching highs of 2529 before yet more US macro gloom spoilt the party. GDP growth in Q2 was revised downward, while home sales slowed and median house prices slumped by the greatest y-y margin since 1970. Aluminium peeled back all the way to 2487 before stabilising and recovering to 2505 in the aftermarket. The C-3m period narrowed with a weekend rolling past Cash, while persistent forward borrowing interest saw rates tighten up a smidgeon throughout. Most of 2009 was now rated Level month-to-month and the carry du jour, 3m-Dec 2011, was valued at 35.00b (30.00b). Trading on Friday morning had been sedate so far, though with the month/quarter end upon us locals were fully braced for a 'dance off' before close of business, to borrow one broker's analogy (where do they get it from?). The reference was to the customary window dressing, forcing valuations one way or another to flatter one's positions at reporting time. Another was more interested in market rumours that this week's aluminium draws were the start of an exercise by one warehouse-owning trader looking to fatten up its sheds ahead of a sale. Prices had traded between 2525-2505, last at 2511 on 1,500 lots via Select.