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BASE METALS: Metals End Higher On Rallying Euro, Equity Markets
Jul 7,2010 08:45CST
smm insight

LONDON, July 7 -- Base metals on the London Metal Exchange Tuesday rallied on a stronger euro and rising stock markets.

Traders characterized the rebound as a relief rally following last week's run of bad economic data, adding they expected the reality of slowing growth in the eurozone and the U.S. would limit gains.

Copper closed 2.1% higher after touching a one-week high. Zinc gained 2.4% and aluminum 3% in decent volumes, traders said.

The EUR/USD rose to its highest since mid-May. European and U.S. equity markets were all in the black, with the Dow up by triple digits.

"The currency played a part and the equities played a part," said a senior trader in London.

Another trader in London said consumers in Europe were increasing their orders, and strong export data in Germany provided some light after last week's gloomy data. "There's buying coming in from the physical side."

However, analysts and traders said they don't foresee a sustained rally. Equity, bond and currency markets appear undecided on whether the eurozone and the U.S. are headed towards a double-dip recession, and that uncertainty will weigh on sentiment until data significantly improves.

"I don't see the market rushing to new heights," said the trader in London said. "I think we'll see some weakness again."

MF Global analyst Ed Meir said he didn't expect the global economy would lapse back into recession, and noted metal inventories have been declining, suggesting demand is firm enough to prevent supply surpluses from building.

Still, he predicted range trading in coming weeks. "(The) ongoing macro uncertainties should limit the upside, and we therefore will likely be in a trading range type of market for some weeks to come."


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