BWR Is Rated A Buy
The base metal complex was indicated lower across the board during London Metal Exchange premarket trade on Wednesday, with the bearish tone set by weak data out of the US and a stocks selloff overnight taking its toll on the commodity spectrum, a trader with an LME ring dealer said. "It's all major panic this morning -- the stocks markets were down yesterday and overnight and even gold is down," he said, suggesting that this softness was not metal-specific. He said the poor retail figures out of the US on Tuesday had caused the Dow Jones to collapse and the uncertainty had a ripple effect across the precious metals, oil and base metals.
"With regard to metals, we saw the reweighting by funds come to an end on Monday evening and since then we have seen lower prices because the funds are not buying," he said.
Basemetals.com analyst William Adams said Wednesday that going forward it does look like the markets are adjusting further for a US recession.
"Especially as the weakness in the housing market seems to have caught up with the consumer judging by yesterday's retail sales data," he said. But Adams said "with the powers-that-be working to prevent a full-scale slowdown in the US, it is likely that they will produce something for the markets to hang their hopes on and that may produce a relief rally which in turn could steady the markets for a while." He said although observers should expect further weakness in the short term, "we need to be on the look out for central bank announcements which may see some value buying return to the metals." Adams noted that overall the wider markets were weak and that was leading to a general selloff with gold now down around $885/oz. "So this resembles the various risk reduction selloffs last year that coincided with equity routs that saw all asset classes suffer as investors reduced exposure across the board," he said.
Meanwhile, bellwether contract copper was down $182 to $6,978/mt, basis three-months, while aluminium had lost $12 from its previous close to $2,471/mt. The trader noted that aluminium was holding its own remarkably well and with the large volumes traded on this contract it tended to be less reactive than the other metals. Lead was indicated at $2,576/mt on Wednesday morning, down $79 from its previous close, while nickel was at $27,700/mt off $700 from its Tuesday close. Tin was bid $200 lower at $16,050/mt, while zinc was down $40 to $2,260/mt. Aluminium alloy was bid $5 lower that its Tuesday floor trade close at $2,325/mt, while North American alloy was indicated at $2,320/mt, unchanged from its last kerb bid.
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