Yesterday was another down day for the metals and markets as geopolitical issues added to the already present concerns affecting the markets, namely sovereign debt in Europe and the possibility of a slowdown in China. Gold and the dollar were the two to buck the trend highlighting investors shift into safe-havens. At the lows of the day base metal prices were off 2.3 percent, but they closed down by an average of 1.4 percent.

LME Overnight Performance
  7:13 AM +/- +/- % Lots
Cu 8265 111.5 1.4% 3451
Al 2283 31.25 1.4% 494
Ni 21800 196 0.9% 158
Zn 2137 42.25 2.0% 1821
Pb 2215 36.75 1.7% 189
Sn 23900 25 0.1% 22
Steel Med 510 0 0.0% 0

This morning the buyers have returned and the base metals are up by an average of 1.2 percent, with most of the metals seeing good gains with the exception of tin that is up just 0.1 percent. Copper is up 1.4 percent to $8,265 after lows yesterday of $8,050. Volumes into the rebound have been relatively good for copper and zinc, but are lower than we saw on recent down days. So for the moment prices have avoided testing last week’s lows and are now in consolidation mode.

Economic Agenda
Time Country   ACTUAL Expected Previous
EUR German Ifo Business Climate   107.6 107.6
9:00am EUR Italian Retail Sales m/m   0.3% 0.0%
9:30am GBP Revised GDP q/q   0.8% 0.8%
9:30am GBP Prelim Business Investment q/q   0.6%
9:30am GBP Index of Services 3m/3m   0.5% 0.3%
10:00am EUR Industrial New Orders m/m   -2.6%
12:20pm GBP MPC Member Sentance Speaks      
1:30pm USD Core Durable Goods Orders m/m 0.7%
1:30pm USD Unemployment Claims   434K 439K
1:30pm USD Core PCE Price Index m/m   0.1% 0.0%
1:30pm USD Durable Goods Orders m/m   0.2%
1:30pm USD Personal Spending m/m   0.5% 0.2%
1:30pm USD Personal Income m/m   0.4% -0.1%
2:00pm EUR Belgium NBB Business Climate   -2.7 -2.8
2:55pm USD Revised UoM Consumer Sentiment 69.5 69.3
2:55pm USD Revised UoM Inflation Expectations   0.03
3:00pm USD New Home Sales   311K 307K
3:00pm USD HPI m/m   -0.1% 0.4%
3:30pm USD Crude Oil Inventories   -1.9M -7.3M
5:00pm USD Natural Gas Storage   -6B 3B
6:00pm EUR Buba President Weber Speaks      
Tentative USD Treasury Currency Report      
11:50pm JPY Trade Balance   0.63T 0.59T
11:50pm JPY CSPI y/y   -1.0% -1.1%

In Shanghai the February contracts are up by an average of 0.7 percent, copper leads the advance with a 1 percent gain to Rmb 62,450, zinc is up 0.8 percent at Rmb 17,425, while aluminium is up 0.2 percent at Rmb 16,290. Spot copper in Changjiang is up just 0.2 percent at Rmb 61,850-62,250 so the market is back in contango, while the LME/Shanghai arb puts imported copper at a premium of $310/tonne.

The dollar remains strong with the dollar index at 79.56, yesterday it extended gains to 79.82 as it broke out of a small bull flag. The euro is weak at 1.3392 as are other currencies with the pound at 1.5830, the aussie at 0.9795, although the yen has firmed slightly to 83.15. Gold is at $1,378 and oil is at $81.70. So again the stronger dollar, gold and yen all suggest haven buying.

Equities – the Dow closed down 1.3 percent, the Nikkei is down 0.8 percent, but it had some catching up to do as it was closed yesterday; the Hang Seng is up 0.75 percent, China’s CSI is up 2.3 percent and the MSCI Asia Apex is up 0.3 percent. So it does look as though some bargain hunting is emerging.

On the economic data front today is another busy day with some of the usual Thursday US data coming out today ahead of tomorrow’s Thanksgiving. German Ifo business climate data is out at 9am GMT, , while in the US we have initial jobless claims, durable goods orders, personal income and spending and new home sales, to name a few – see table on right for more details.

Our view is that given the deterioration in the fiscal/economic and geopolitical backgrounds, and considering the rapid gains seen since June, there is room for deeper corrections as profits are taken. However given the buy the dip mentality that seems ingrained in the market, we feel there will be bouts of buying along the way, but we would expect rebounds to be sold into.


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