interesting

Zinc comments still positive

DJ Comex Copper Review: Slips After Fall In Chinese Equities
By Allen Sykora

Of DOW JONES NEWSWIRES



High-grade copper futures fell Tuesday in response to a steep decline in
Chinese equities, traders said.

However, some say, some demand emerged at the lower levels, helped by a
recovery in crude oil and a strong existing-home sales report.

The March copper contract fell 5.05 cents to settle at $2.8050 per pound on
the Comex division of the New York Mercantile Exchange, while most-active May
contract fell 4.50 cents to $2.8250.

The futures came into the session with a softer tone and remained that way
all day, although they did pare their losses around late morning.

"There was weakness overnight across the board with some fears out of China,
after the Chinese stock market was down around 8%," said one trader. "Maybe
there was also a little profit-taking from on the way up."

The Shanghai Composite Index plunged 8.8% on Tuesday to 2,771.79, due to what
analysts described as efforts by investors to cash in on recent gains and avoid
any government attempts to cool the markets.

During the course of the day, several analysts cited this as a factor hurting
commodities generally, particularly if Chinese authorities should take any
steps to curb economic expansion, which could hurt demand from the country.

"This morning's weakness in metals has been triggered by the steep slide in
the Chinese stock market," said an early-morning research report from Man
Financial analyst Edward Meir. The decline was the steepest in a decade on
fears that authorities will move to cool the country's booming economy, he
said.

Copper's pullback came after the May futures had risen 50.20 cents from a
Feb. 8 low of $2.3980 to a high on Monday of $2.9000, a gain of 22%.

The May futures held well above support Tuesday at the $2.70 breakout level
that failed as resistance Thursday, however.

"I think overall, metals are still supported and any dips should be bought,"
said the trader.

William Adams, analyst with BaseMetals.com, also described the market has
having underlying support.

"The sell-off in metals on the back of the equities seems to have run into
good underlying buying," he said in a late-day research note. "The test will
now be whether the rebound can hold on to the gains.

"Overall we think the base metals complex remains constructive, especially
for copper, zinc and tin, but we would not have been surprised if the pullback
had run further. If that was the extent of the selling, then it suggests to us
that sentiment may be more bullish than the market realizes."

Adams and Frank Lesh, futures analyst with Future Path Trading, both
commented that copper was able to pare its loss as crude oil and oil bounced
from their early lows.

"Admittedly these latter two commodities are also reacting to the heightened
geopolitical tensions over Iran, but they will help sentiment overall," said
Adams.

Copper opened the New York session weaker after the plunge in Chinese stocks,
then didn't get any help when the first U.S. economic report of the day was
soft. Durable-goods orders fell 7.8% last month, when the market had been
looking for a smaller decline of 3.2%.

Other U.S. data, however, was stronger than expected. The Conference Board
said its February consumer-confidence index rose to 112.5 from a revised 110.2
in January. The forecast had been for a 108 reading. Also, existing-home sales
in January rose 3% to an annualized rate of 6.46 million, when the forecast had
been for 6.25 million.

If the home-sales data is indicative that house building is on the rise, then
this could mean an end to de-stocking in the U.S., said Adams. "We await
tomorrow's new-home sales data with interest," he said.

Wednesday's economic schedule begins with preliminary fourth-quarter gross
domestic product, expected to show 2.2% growth, at 8:30 a.m. EST (1330 GMT).
The advance fourth-quarter rate was 3.5%.

The Chicago Purchasing Managers Index is due out at 9:45 a.m. EST (1445 GMT)
and U.S. new-home sales are due out at 10 a.m. EST (1500 GMT). The PMI is
forecast to uptick to 50.0 in February from 48.8 in January, while new-home
sales are expected to fall 3.6%.

Also on Wednesday, the Department of Energy's weekly inventory data - which
can influence crude oil, which in turn often leads metals - is due out at 10:30
a.m. EST (1530 GMT).

Inventories of copper in London Metal Exchange warehouses fell 2,400 metric
tons Tuesday, leaving them at 208,350 metric tons. The most recent Comex stocks
data, released late Monday afternoon, were up 363 short tons at 36,994 short
tons.


Settlements (ranges include electronic and pit trading):
Mar (HGH07) $2.8050; down 5.05c; Range $2.7700-$2.8505
May (HGK07) $2.8250; down 4.50c; Range $2.7880-$2.8650


- By Allen Sykora, Dow Jones Newswires; 541-318-8765;
[email protected]



(END) Dow Jones Newswires

02-27-07 1417ET

Copyright (c) 2007 Dow Jones & Company, Inc.

DJ info: 82100
N/DJCS,N/DJME,N/OSCM,N/OSME,N/OSOV,N/OSTR,N/CMD,N/CMM,N/CPE,N/DJWI,N/DRV,N/FCTV
N/MET,N/MKC

FSN2100 CMOT COMMENTS METALS
2007-02-27 19:17:06 UTC
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