Aluminium alone accounted for more than half the LME’s outright turnover on Thursday as it climbed to 5-month highs over the course of the day. After a steady start c. 2710 the market rose to 2730 before we signed off, extending to 2739 in the premarket before slipping to 2725. As the day progressed fresh technically-inspired buyers, short-covering CTAs and (short) options hedgers bid prices through layers of producer selling. It was ‘two steps forward, one step back’, as the market retraced somewhat after each upward surge and 3-months reached 2750 in the pm kerb. Weak US macro data appeared to be offset by still-positive figures from China, while firmer oil and gold markets were also supportive.
Nearby spreads tightened again with worries about a December liquidity squeeze remaining uppermost, while rates to 2011 edged wider incrementally as producers carried (borrowed) fresh sales forward.
On Friday morning LME Select recorded its opening trade at 2736 before being marked back up to 2750. In one of the quietest premarket sessions of the past month prices then slid, tailing right off to 2715. Fresh buyers seemed to be resting and with stocks in Shanghai having risen and those on the LME having fallen, levels of interest had waned considerably. As we went to press values had bounced quickly to 2735, though volumes were light. While some locals were now looking for aluminium to head straight for higher territory, Cliff Green Consultancy considered the market to be not yet out of the woods. The trading strategists suggested that a failure to sustain itself above 2730 would be “disappointing to the bullish scenario” and could trigger renewed bouts of weakness. On the other hand, success here would point to targets c. 2785 and 2885 “after a period of digestion”, they added.
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