After trading lower for most part of the day, base metal prices pared some of there losses as investors took respite from increasing housing starts, declining current account deficit and jobless claims. Lead and zinc were the major losers as they ended with losses of close to two percent.
US equity markets ended higher with gains of 0.4 percent on the back of better than expected economic data.
Asian equity markets are trading mixed, largely consolidating. IMF said that Spain would avoid crisis without needing a rescue and thereby put to hold concerns of re-emergence of sovereign issues.
This is sending the euro higher and putting a pressure on dollar index which is currently trading lower by 0.3 percent. Exchange traded copper, which though still at a very nascent stage, has witnessed an increase by close to 570 tonnes thereby taking the total stock to 595 tonnes.
All this is sending base metal prices higher by more than a percent in the morning session on LME. On the economic data front, IFO expectations from the Germany are expected to come in mixed while the leading indicators from US are expected to come in positive.
Overall, increase in ETF holding along with decline in dollar index is expected to send base metal prices higher.
Aluminium
After witnessing build-up of 10,325 tonnes on the previous day, aluminum stocks witnessed draw-down of 4,625 tonnes.
However on a weekly basis, stocks are headed for a rise as so is the case with other base metals as well.
The open interest decline along with modest rise in price indicating profit booking at higher levels.
Copper
Copper inventory on London Metal Exchange rose for fourth consecutive day. Stocks increased by 2,850 tonnes as against increase of 7,050 tonnes in the previous day.
The cancelled warrant ratio has been declining indicating that the inventory might continue to rise in the near term (see accompanying chart).
Copper market continues to remain in backwardation but the premium in spot has declined from $70/tonne to $40/tonne.
Lead
Lead stocks continue to rise for second consecutive day to the extent of 725 tonnes.
Stocks are however headed for a weekly increase and more than in the last week build-up of 700 tonnes in the whole of last week.
Lead market has moved into backwardation indicating tight supply conditions and the basis currently stands at $-1.5/tonne.
Nickel
Nickel stocks witnessed a build-up of 252 tonnes from London Metal Exchange as against decline of 192 tonnes on the previous day.
The inventory movement continues to remain uneven and might remain so in the near term given the indication from cancelled warrant ratio.
Open interest increased along with rise in price indicating long build-up. In fact, nickel is the one which has been consistently witnessing increase in long positions.
Zinc
Zinc stocks witnessed decline of 575 tonnes on LME as against draw-down of 100 tonnes on the previous day.
Stocks are however headed for a weekly increase and would be the highest among the base metals, close to 70,000 tonnes.
Open interest increased along with decline in prices indicating build-up of short positions. So at the time of short covering zinc prices might outperform others.
