COMMODITIES-Base metals slide on fund sales, softs weaker
5/29/2001 1:47:00 PM
By Jeremy Smith
LONDON, May 29 (Reuters) - London's base metals markets failed to muster much upward momentum in sluggish Tuesday trade due to hedge fund selling, while gold drifted after last week's gyrations.
Earlier weakness of the euro <EUR=> against the U.S. dollar also sparked selling in the metals as European consumers were deterred from buying, and some of the soft commodity markets were also hit by the currency factor.
BASE METALS UNDER ATTACK FROM FUNDS
On the London Metal Exchange (LME), most metals closed the day at the bottom end of their ranges as disappointed hedge funds nibbled away at the lower levels following a concerted sales attack based on the euro's weakness. The European single currency shed half a percent against the dollar to eye this year's lows earlier on Tuesday on renewed worries about growth in the euro zone, although by later in the day it had managed to pare some of its losses.
"All the main metals have tested levels -- for aluminium it was $1,550 -- which they have been incapable of breaking above. On copper we saw this at $1,750 which was a similar story," said Kevin Norrish of Barclays Capital.
Copper fell to a close of $1,708 a tonne from $1,733 on Friday despite news of a cutback in mine output from U.S. producer Kennecott, a strike threat from Chile's Codelco and Phelps Dodge (PD) , the world's number two producer, cutting its staff at the Tyrone mine in New Mexico by 15 percent. Weaker U.S. stock markets added to the metals gloom as an earnings downgrade of two leading technology firms reawakened fears that the slumping U.S. economy would again cause corporate profits to disappoint investors.
Aluminium closed at $1,517 against $1,545 at the last close on Friday and is expected to hold at $1,500/10, supported by production cuts in the U.S. due to the rising price of energy in the Pacific Northwest, Norrish said. Zinc was mired around 28-month lows under $940 a tonne and closed $4 lower at $937. The price has been steadily grinding lower since the start of the year due to weaker offtake from the steel galvanising sector, construction and auto industries.
In precious metals, gold settled back from its earlier highs during with options expiries having little discernible impact. Spot gold closed in London at $274.90/275.50 a tgroy ounce, down from Friday's New York close of $277.40/276.35. Analysts said bullion prices might drift lower in the short term but added that the outlook looked more optimistic further ahead given position-building by investment funds last week. Last week prices were pushed up to almost $300 an ounce in a rally backed by aggressive fund buying amid inflation fears. The rally was very brief, and prices fell to an 11-month low before returning to levels above $277. "While physical demand may be underpinning the market, the failure to regain the $282.00 level could yet prompt further liquidation," said analyst Rhona O'Connell at Canaccord Capital.
SUGAR, COCOA STAY WEAK
On the softs, a weak New York raw sugar market kept London whites firmly in negative territory in later trading in the wake of selling inspired by the euro's weakness. Sugar prices have been in retreat since hitting seven-month highs one week ago. Renewed speculator selling hit London's cocoa market and pushed the benchmark July contract to close nine pounds lower at 783 pounds a tonne, just off its day's low of 782 pounds. This was the lowest level since May 8, when it touched 776 pounds.
Some prices at 1700 GMT:
TUESDAY FRIDAY
Ldn Spot Gold ($ per ounce) 274.90 277.40
IPE Brent Crude Oil (July) 29.05 28.47
London Metal Exchange
(Three months delivery)
Copper ($ per tonne) 1,708.00 1,736.50
Aluminium ($ per tonne) 1,517.00 1,547.00
LIFFE
July Coffee ($/tonne) 570.00 578.00
July Cocoa (Stg/tonne) 783.00 792.00
August white Sugar ($/tonne) 254.00 257.20
July CBOT wheat ($/bushel) 2.61 2.61
REUTERS |
