European Opening View - Metals get some lift as selling pressure fades

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
9:00am	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%	0.7%
9:30am	GBP	Index of Services 3m/3m		0.5%	0.3%
10:00am	EUR	Industrial New Orders m/m		-2.6%	5.5%
12:20pm	GBP	MPC Member Sentance Speaks
1:30pm	USD	Core Durable Goods Orders m/m		0.7%	-0.4%
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%	3.5%
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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