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MEIR ON METALS: Metals push higher, but keep a wary eye on Greece


Analyst Ed Meir looks at what is moving the metal markets on Thursday May 10.

Copper and General Commentary: Metals fell again on Wednesday, led by copper, which fell to its lowest level in three weeks. However, just like the decline on Tuesday, prices managed to pick up off their lows, and in copper’s case, reclaim the $8,000 mark. Most other markets also lost ground, although the extent of the selloff was not as pronounced as was seen earlier in the week. The euro fell for an eighth straight day, closing well below $1.30, but Brent bucked the trend, finishing higher.

There was not much new in terms of headlines other than the fact that the markets continue to worry about Greece. The leftist leader charged with forming a government has apparently thrown in the towel and it is now up to the third place finisher, the socialist PASOK party head, to give it a go. In the meantime, a Bloomberg poll reveals that 50% of investors are now predicting a euro exit by Greece as early as this year, a stunning turn of events compared with what was being expected only a few weeks ago.

Metals are mixed right now, erasing earlier losses brought on by disappointing Chinese trade data. In this regard, the government reported that copper imports by China declined for a second month in April, coming in at 375,258 metric tonnes,19% lower than in March, but still higher than the 262,676 tonnes from a year ago. Scrap copper imports totalled 370,000 tonnes in April, compared with 430,000 tonnes in March.

In the broader trade category, Reuters reports that the annual growth rate in Chinese imports during April was just 0.3%, far below an expected 11% increase, while exports were up 4.9% versus expectations of an 8.55% increase. Exports to emerging economies fell alongside those to Europe, but it is the stall in imports that is more worrying, as it suggests that consumer demand is not picking enough to offset the softness in exports.

In other markets right now, the precious metals group is slightly weaker, energy prices are off slightly, but the euro is steady, now trading at $1.2960. US stocks are expected to open higher, but not by much.

We don’t have much to add to what we have written in recent commentary and still expect prices to drift lower in the days ahead. Having said that, many complexes, particularly the precious metals group and equities, are getting quite oversold, with RSI’s in the low 30s. Therefore, there is the possibility of some sort of short-covering rally setting in, but we would need to see a headline triggering it. One possibility could be if the PASOK party in Greece surprises the markets and stitches together a governing coalition. However, we would not want to bank on such an outcome too much, as the more likely scenario is one where the whole process grinds on towards yet another election, meaning more uncertainty for the euro and the markets at large.

Technically, we are now at $8,106 on copper, up $52, and fluctuating within a relatively narrow $100 band between $8010 and $8129. LME stocks were down again today by roughly 1,100 tonnes.

Aluminium: Ali is now at $2,046, down $3, with an intraday low of $2,035 seen.

Zinc: Zinc is at $1,953, up $10, and very quiet. For now, we seem to be hanging on to $1,940 support, but just barely.

Lead: Lead is at $2,084, up $11 and still looking relatively steady.

Nickel: Nickel is at $17,250, up $55, but we did get to a low of $17,054 at one point in the day.

Tin: Tin is at $20,625, up $20; next support is at $20,000.

Ed Meir

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