The metals generally had a quiet start to trading on Friday, they wobbled a bit with the mixed US employment report but sentiment then changed to the positive into the close with the strong numbers at the end of the week triggering system-based buying. By the close metals were up by an average of 1 percent, at the day’s highs they were up 1.6 percent and copper set a new high at $10,100, while tin reached $31,300. So for the moment sentiment remains bullish as all eyes are focused on stronger recovery in developed world. However, as last weeks Chinese PMI numbers showed we need to keep an eye fixed on the emerging markets, especially on China.

This morning in Asia the metals are upbeat with average gains of 0.9 percent, copper is pressing ahead at record prices, last up 0.6 percent at $10,120, but volumes are light with China still on holiday. 611 lots of copper have traded, while total volume is just 1,728 lots. Nickel is up 1.4 percent at $28,710, while zinc is up 1.1 percent at $2,523.

The dollar is firmer, but still generally weak, with the dollar index at 77.91, the euro is at 1.3615, the pound is strong at 1.6160 as is the aussie at 1.0140, while the yen is weaker at 82.40. Gold continues to consolidate in mid-range, last at 1,348.40.

Equities – the Dow closed up with a 0.25 percent gain at 12,092, while this morning Asia is mixed, the Nikkei is firmer, helped by the weaker yen, while the Hang Seng is down 0.6 percent and the MSCI Asia Apex is down 0.4 percent. So equities are showing a mixed picture, with Hong Kong and the MSCI Asia Apex taking on a weaker note despite the overall bullish undertone from last week.

The economic agenda is fairly busy today, Japanese leading indicators are supportive, beating last month’s reading, while later we get EU Sentix investor confidence numbers, German factory orders and US consumer credit data. Plus Buba’s Weber is speaking as is ECB’s Trichet.

Our view is that while market sentiment remains bullish, underpinned by numerous supply disruptions across the metals and generally good economic data, the underlying trends are going to push prices higher, but we feel prices have run ahead of the fundamentals. Therefore there is a risk that some piece of news or development will force a correction at some stage. The most likely event is further news of tightening in emerging economies, but it could be a spread of unrest in the Middle East, or something out of the blue. However, until something unfolds to dampen sentiment the path of least resistance is to the upside, but the risk lies below and we would say the elastic band below current prices is quite stretched now.

LME Overnight Performance
7:24 AM +/- +/- % Lots
Cu 10120 65 0.6% 611
Al 2548.5 18 0.7% 262
Ni 28710 410 1.4% 250
Zn 2523 27.5 1.1% 423
Pb 2597.5 23.5 0.9% 142
Sn 31280 204 0.7% 40
Steel Med 550 0 0.0%

Economic Agenda
Time Country Period ACTUAL Expected Previous
5:00am JPN Leading Indicators 101.4% 101.5%
9:30am EU  Sentix Investor Confidence 14.1 10.6
11:00am EU German Factory Orders m/m -1.4% 5.2%
1:00pm EU Buba President Weber Speaks
EU ECB President Trichet Speaks
8:00pm US  Consumer Credit m/m 2.2B 1.3B
11:50pm JPN Bank Lending y/y -1.9%
11:50pm JPN Current Account 1.55T 1.15T
11:50pm JPN M2 Money Stock y/y 2.3% 2.3%

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