Metals seek directional cues, buyers have no stamina

2011 2 20 Base metals drifted on the LME on Friday morning, treading water above intraweek lows, but the bulls lacked the impetus to push prices higher.

Metals were mixed, with copper and tin suffering as longs liquidated their positions, but others viewed the latest sell-off as little more than a healthy correction.

The metals seem to be undergoing a mixture of consolidation and correction; yesterday s rebound shows there is dip buying around but a lack of follow-through buying overnight and weaker prices this morning suggests there is more selling to be done as well, FastMarkets analyst William Adams said.

Base metals had rallied late on Thursday afternoon on US manufacturing figures suggesting that consumption growth is likely to accelerate again. The Philadelphia Manufacturing Index jumped to 35.9 in January, far surpassing analysts forecasts of a modest climb to 21.

UK retail sales surged by four times analysts estimates in January - the most since February 2010 - suggesting the contraction of 0.5 percent in the fourth quarter of last year may have been a temporary phenomenon.

There is no major economic data due out of the US but markets were unnerved by news that Chinese leading indicators dropped 0.5 percent - the first decline in three years. Markets are closed in the US on Monday for President s Day.

China s central bank earlier today raised reserve requirements for lenders by half a percentage point - the second raise of this year after six increases in 2010 - a mere 10 days after the world's top metal's consumer raised interest rates.

China's major banks must now keep 19 percent of their deposits in reserve, while small and medium-sized banks must maintain a reserve of 15.5 percent.

Inflation hit 4.9 percent in January, exceeding Beijing s target of around four percent for the fourth consecutive month.

Concerns about burgeoning inflation in China resurfaced after figures showed that home prices in all but two of 70 cities continued to escalate last month, defying government attempts to cool the country s red-hot housing market, Fairfax analyst John Meyer said.