London 02/04/2012 -  Metal put in a strong performance on Friday to close up 1.1 percent on average. At the day’s highs gains averaged 2.2 percent, which recouped some of the losses seen mid-week. However, we would not be surprised if the stronger tone on Friday was more to do with month and quarter-end rather than the result of a pick-up in sentiment.

Lead was up 2.3 percent to $2,037 as Doe Run had declared force majeure on lead shipments from its Herculaneum smelter, but before that news had broken, lead, nickel and aluminium had generally been the weaker metals and indeed aluminium closed near the day’s lows and at  levels not seen since mid-January.

Better than expected official manufacturing PMI data out in China over the weekend has lifted prices this morning where gains average 1.1 percent with copper up 0.8 percent at $8,499 and with tin and nickel up the most with gains of 1.6 percent and 2 percents respectively. Volumes have, however, been light at 3,815 lots as China is on holiday today, Tuesday and Wednesday.

Equities – The Euro Stoxx 50 closed up 1 percent and the Dow was up 0.5 percent on Friday, but trading in Asia has been mixed with the Nikkei up 0.5 percent, the Hang Seng is down 0.4 percent, the MSCI Asia Apex is up marginally while the Australian All Ordinaries is down marginally.

The dollar remains subdued with the dollar index at 78.95, the euro is at 1.3343, the yen is at 83.03 and sterling is firm at 1.5987. Gold and silver are also firmer at $1,668.70 and $32.53.

The economic calendar is busy with manufacturing PMI coming out across Europe, the UK and in the US, plus we get data on unemployment rates in the EU and construction spending in the US, see table on right for more details.

Data out yesterday and earlier this morning showed continued weakness in Japan’s manufacturing Tankan report, while the manufacturing PMI data from China was mixed with the official data series rising to 53.1 from 51, while the HSBC series was 48.3 after 48.1.  

With aluminium, nickel and lead extending to the downside last week we do feel sentiment has become weaker. There does still seem to be good scale down buying around and given the tightness in the physical market that is not so surprising. It is also likely to remain the case now that we are in the seasonally strong second quarter.

On balance we feel prices are likely to consolidate as the lower levels from last week do seem to be attracting some buying. Today’s PMI data is likely to be watched closely.

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