Metals - Copper steadies as traders weigh dollar weakness, stock...

Metals - Copper steadies as traders weigh dollar weakness, stock rises UPDATE
Fri, Oct 19 2007, 09:57 GMT
http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=ec7b45ab-fd00-44f9-a189-de15ce98f398

(Updates prices, adds details)

LONDON (Thomson Financial) - Copper steadied as traders weighed record weakness in the dollar against ongoing increases in LME and Shanghai stocks and renewed concerns over the US economic outlook.

The dollar hit another all-time low against the euro earlier this morning, underpinning metals like copper by making them cheaper for holders of other currencies.

On the other hand, traders were digesting yet another gain in LME inventories, which rose by 1,200 tonnes to total 148,950 tonnes today. Stocks are currently at five month highs, having risen for most of this month.

Meanwhile in Shanghai, data out earlier showed a week-on-week increase in copper stocks, noted RBC Capital analyst Alex Heath. Stocks rose 5,335 tonnes to 63,895 tonnes in the week to Thursday.

Heath said stocks data aside, metals markets are also growing increasingly concerned about the economic outlook in the US, with worries over the housing and credit crisis rearing their heads again this week.

Data out in the US yesterday showed weekly jobless claims rose by 28,000 to 337,000, their highest in two month. Meanwhile, the Philly Fed manufacturing index dropped to 6.8 in October from 10.9 in September.

"What's happened this week has been a wake up call. Renewed concerns on the sub-prime crisis and the US economy have pushed fundamentals to background and just when people thought the market was tight we've seen a rise in stocks which has undermined bullish sentiment," said Heath.

He added, however, that he remains "friendly towards copper", and that the market has this week been ignoring potential strike action in Peru and the prospect of rising demand from China.

At 9.45 am, LME copper for 3 month delivery was up slightly, rising 6 usd to 7,866 usd a tonne.

Prices have been receding for much of this week. They fell sharply yesterday after the weak US data renewed concerns that problems in the housing and credit markets might be spreading to the broader economy.

But BaseMetals.com analyst William Adams said the secondary impact of yesterday's poor US data may well end up boosting the metals as it could encourage the Fed to cut interest rates again.

"Indeed the Fed cut in September was largely behind the bullish run that emerged straight after ... so perhaps we should expect more of the same," he said.

In other metals, lead was up 24.75 usd at 3,689 usd a tonne, with markets overlooking another large rise in LME inventories, this time by 2,000 tonnes. Inventories have risen by more than 10,000 tonnes this week alone.

However, prices have held firm overall, reflecting the market's view that the market remains tight overall, with ongoing supply disruptions in Australia and an expected increase in demand from the battery industry.

Aluminium was up 5 usd at 2,557 usd a tonne, underpinned by a 1,775 tonne fall in LME inventories to 932,650 tonnes and expectations that supply demand balances in the market will tighten next year.

Tin was up 175 usd at 16,325 usd a tonne, nickel surged up 425 usd to 32,925 usd a tonne, while zinc was flat at 2,970 usd a tonne.

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