BASE METALS: End Mostly Lower As Investors Focus On Debt Woes

Sep 06, 2011 LONDON (Dow Jones)--Base metals closed mostly lower on the London Metal Exchange Tuesday as the worries over the euro-zone debt crisis again took center stage, driving investors out of risky assets.

"The mood is sour practically everywhere you look," said Kitco Metals analyst Jon Nadler.

U.S. stocks dropped sharply, while other commodities--including Nymex crude oil, precious metals, and coffee and wheat futures--also moved deeper into negative territory.

LME three-month copper closed the session down 0.3% at $8,933 a metric ton. Three-month lead closed 1.9% lower at $2,384/ton.

Elevated concerns over Greece's debt sent the euro to its weakest level against the dollar since July 13 during the session, with investors increasingly doubtful of Europe's ability to prevent contagion on the 17-nation euro-zone currency bloc.

Demand for the metals tends to drop away when EUR/USD falls, as a higher greenback makes dollar-denominated commodities more expensive for buyers using the single currency.

"At this stage, most macro indicators that have been coming our way over the past month are telling us that the global economy is firmly entrenched in a 'soft patch,' one which will likely need more time to play itself out," MF Global analyst Edward Meir said.

Base metals are sensitive to economic developments and speculation, as they are widely used in manufacturing and construction. They are also considered risk assets, compared with gold and core government bonds, so are vulnerable to swings in market sentiment.

Meir said the charts for LME copper now look a little "shaky," with the short-term upchannel having given way, and expects the market could move lower from here, with $8,700/ton potentially the next stop.

Prices in dollar a metric ton.
3 Months Metal                Bid-Ask       Change from
                                          Monday PM kerb
Copper                     8933.0-8934.0     Dn 26
Lead                       2384.0-2385.0     Dn 46
Zinc                       2187.0-2188.0     Up 15
Aluminum                   2380.0-2381.0     Dn 7.5
Nickel                    20670.0-20675.0    Dn 200
Tin                       23800.0-23850.0    Dn 150
Aluminum Alloy             2292.0-2295.0     Up 2
Aluminum Alloy-NASAAC      2410.0-2411.0     Unchanged