09 September 2002 05:03
AAP MARKETS REPORT for Monday Sept 9, 2002 =3 Sydney
COMMODITIES In LONDON, the London Metal Exchange complex burst higher on Friday, led by a sizzling performance on the
US stock market after the release of strong economic data, but the overall trend in metals remains flat, analysts said.
LME aluminium herded the other metals higher, after a combination of upbeat sentiment injected by news of a sharp fall
in US unemployment, and a flurry of forward buying. But with tension between the US and Iraq threatening to hot up,
doubt persists over the pace of the global economic recovery, which is leaving the industrial base metals in limbo.
"We're not going to divorce ourselves from the equities and the macroeconomic scene as they will reign
supreme. As uncertainty rules, people will be looking at the probability of a war with Iraq, and where the oil price is,
and they'll be doing their calculations and looking at the factors that will remain with us," Robin Bhar of
Standard Bank said. "Base metals are still pretty much range-bound ... with all this uncertainty we'll
probably see them drift lower and lower," he said. After the US Labor Department released its August payroll report
that showed that the unemployment rate fell to a surprising five-month low of 5.7 per cent from 5.9 per cent in July,
equity markets steadied, which helped the metals to rally. Aluminium shot through resistance at $1,320 a tonne after a
combination of short-covering and fresh forward buying picked the price up from an earlier low of $1,303, ending the day
a full $13 higher at $1,324. "That (jobs data) was enough to put a brake on it. We saw covering by the shorts on
the realisation that they (metals) weren't going to break down and the stock market was going up," Bhar said.
Aluminium's late spurt helped copper close up at $1,489, showing just a $7 gain on its last close at $1,482, but up
from a low of $1,464.50. But even with aluminium and copper showing stability, traders will be more likely to sell
rallies rather than buy dips, but ultimately, the market will continue to dance to the tune of the the stocks and the
economic numbers. Nickel ignored copper and aluminium and closed lower on the day at $6,680, down from $6,700
previously, but a backwardation of $9/19 in the cash-threes spread would keep the market from selling aggressively,
analysts said. The rest of the metals ended the day on a more positive note, as zinc closed at $774, up from $771, lead
moved up $1 to $437 and tin closed up at $3,880 against $3,860 previously. In the alloys, standard closed at $1,270
versus $1,260, while North American finished at $1,420/25, virtually unchanged on its last close. In NEW YORK, COMEX
gold rose to a six-week high Friday as the White House ratcheted up its campaign to oust Iraq's Saddam Hussein and
Wall Street swallowed paranoia about the 9/11 anniversary and took stocks sharply higher. "There are still some
fears as we approach Sept 11. There's been talk of some type of anniversary attacks," said James Pogoda, a
vice president of precious metals at Mitsubishi International Corp. "And, there's the Iraqi thing -- crude is
up, we cracked $30 (a barrel)." December gold ended up $1.70 at $321.50 an ounce, trading $319.20-$322.90. That was
its highest since July 23 and the top corresponded with the downward sloping trendline connecting the peaks from this
summer. Estimated volume was a brisk 38,000 contracts. Dealers said gold rose even as investors piled into blue-chip and
tech stocks. Bullion took its positive signal from a 1.4 per cent gain in the XAU Index of gold and silver mining
shares, considered a leading indicator for the metal. It was gold's fourth straight rally since traders returned
Tuesday from the last long weekend of the summer. Speculators are rebuilding long positions, bulled up for a return to
the highs now that gold has muscled back above $320 an ounce. The CFTC Commitments of Traders report released after the
close showed the net noncommercial long in gold expanded to 6,115 contracts from 2,382 in the week to Tuesday. Spot gold
was last at $320.00/50, up from Thursday's New York close at $318.35/85 and London's late bullion fix at
$319.25. COMEX December silver slipped 0.5 cent to $4.54 an ounce, in a $4.53-$4.58 range. Spot silver was last at
$4.51/53, off from $4.52/54 late Thursday. The fix was $4.53. The net speculative long in silver contracted to 11,355
contracts as of Tuesday from 13,126 contracts a week before. NYMEX October platinum rose $3.40 to $542.40 an ounce. Spot
platinum was at $540/545. December palladium jumped $6.40 to $331.40 an ounce. Spot palladium closed at $327/337 an
ounce. In NEW YORK, NYMEX crude oil ended up sharply Friday but below its peak above $30 a barrel that it climbed amid
fears of a full-scale attack on Iraq, traders said. NYMEX crude for October delivery settled at $29.61 a barrel, up 63
cents or 2.2 per cent, gaining for the third straight session. It eased from the day's peak of $30.19, the highest
since August 20 when prices jumped to $30.32 which was an 18-month high. The rally was prompted by a massive airstrike
Thursday by US and British planes on an Iraqi air defense target in a "no-fly" zone. US President George W
Bush rang heads of state in France, China and Russia to win support for his plans for a "regime change" in
Iraq. The calls came ahead of what some in British media are dubbing a "war summit" this weekend with ally UK
Prime Minister Tony Blair. "A lot of bullish forces converged today, and they're pretty overwhelming. If you
are an oil trader you don't want to be short over the weekend," said Phil Flynn, analyst at Alaron Research in
Chicago. "Not only do we have near record demand (in the U.S.) for refined petroleum products while crude supplies
are dwindling, there is a very real prospect of war near-term," Flynn added. In London, October Brent crude on the
International Petroleum Exchange reached 11-month highs before easing to settle at $28.29 a barrel, up 63 cents or 2.3
per cent. Ahead of the weekend, New York oil traders were also watching two storms lurking in the northern section of
the Gulf of Mexico, where oil and gas operations are extensive. The storms are expected to make landfall in Texas and
Louisiana by the weekend. A forecast after midday by the US Energy Information Administration that US inventories of
natural gas, heating oil and propane were sufficient to prevent a spike in retail fuel prices this winter led to some
profit-taking. Traders' focus will remain on Iraq and OPEC next week. And with the nation marking the first
anniversary of the September 11 attacks, traders said the market is keyed to any news related to terrorism. NYMEX
October heating oil settled 1.08 cents or 1.4 per cent higher at 78.39 cents a gallon, moving between 77.90 and 79.70
cents. NYMEX October gasoline settled at 78.63 cents a gallon, gaining 0.97 cent or 1.2 per cent, having played from
78.35 to 80.00 cents. MORE
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