Market and product

Base metals were trading in negative territory on Tuesday morning on the LME in low volumes in a holiday-shortened week while the market looks for fresh direction, traders said.

A stronger dollar following comments from two US Federal Open Market Committee political advisors that the central bank could look to raise rates as soon as the April meeting has added headwinds to the complex, one trader said.

Most market participants expect the US to raise rates next in September, according to CME Group FedWatch. Last week the Fed adopted a more cautious tone than was anticipated, reducing the number of rate rises it anticipates making this year to two from the four it envisaged at its December meeting.

The dollar index, which last week fell to a five-month low of 94.58, was last higher at 95.56.

Adding to the sense of uncertainty are reports of deadly suicide attacks emerging from Brussels. Explosions in the Belgian capital, for which the unconfirmed death toll has already risen to 23, come days after the arrest of a suspect in the Paris terror attacks in November.

While the motive for the attack has yet to be confirmed, any increase in geopolitical tensions would sway risk sentiment and risk appetite, analysts said.

While the French flash manufacturing PMI at 49.9 missed the forecast 50.2 but the services number at 51.2 was better than the expected 49.5.

Likewise, the German flash manufacturing PMI at 50.4 fell short of the expected 50.9 but the services number at 55.5 beat the predicted 55.1. Still, the German IFO business climate at 106.7 beat the forecast 106.1.

The flash manufacturing PMI for the eurozone as a whole was in line with forecast at 51.4 while the flash services PMI at 54.0 surprised to the upside.

While German ZEW economic sentiment undershot at 4.3 – a reading of 6.3 had been seen – the reading for the eurozone as a whole at 10.8 outperformed the forecast of 8.2.

The US HPI, the flash manufacturing PMI and the Richmond manufacturing index are due from the US later

In the metals, copper was last at $5,050 per tonne, down $14 on Monday’s close. Business has been slow – fewer than 5,000 lots have changed hands on Select so far.

In today’s warehouse data, copper stocks fell a net 3,300 tonnes to 151,975 tonnes and cancelled warrants fell 25 tonnes to 44,175 tonnes.

A continued decline in stocks held in LME sheds has created the perception of tightness – the benchmark cash/threes was last at a backwardation of $24.50.

Aluminium at $1,502 was $10 lower although stocks fell 9,225 tonnes to 2,837,275 tonnes and cancelled warrants fell 2,200 tonnes to 893,875 tonnes.

Nickel fell $105 to $8,665. Stocks fell 1,176 tonnes to 431,148 tonnes

Zinc was $11 lower at $1,864 despite stocks falling 2,050 tonnes to 441,350 tonnes and cancelled warrants climbing 2,125 tonnes to 55,025 tonnes and zinc dropped $12 to $1,817, with stocks falling 1,700 tonnes to 161,500 tonnes.

Tin recently traded at $16,875, down $25. Stocks rose 40 tonnes to 4,370 tonnes but cancelled warrants climbed 200 tonnes to 540 tonnes. Steel billet, cobalt and molybdenum were neglected.
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