Base metals recover

Industrial metals bounced on Tuesday as investors waited for a decision on benchmark interest rates from the US Federal Reserve later in the session. Tin hit a record high of $20,950 a tonne as speculators bet on supply shortages and higher prices.
Copper for delivery in three months on the London Metal Exchange, often considered a key gauge of real economic activity ended up at $8,210 a tonne from $8,051 on Monday, when it hit a 4-week low of $8,010. "Odds are high that we will get a one percent cut in rates, although there is talk that the reduction may even be higher," said Edward Meir, analyst at MF Global.
"This should further stabilise the equity markets, and help return the commodity markets to a firmer footing, but needless to say, things remains very uncertain." The Fed is widely expected to cut interest rates by 1 percentage point to 2 percent at a policy meeting around 1815 GMT on Tuesday. Some investors are looking for a deeper cut.
Lower rates would typically mean a weaker dollar, which would supports commodities priced in the US currency. The dollar hovered above its lows against the yen and the euro. Further losses could also be triggered by fresh signs of instability in the US financial system.
"The rebound in investor sentiment is linked to a likely large (Federal Reserve) move today," J.P. Morgan said in a note. Tin closed at $20,750 a tonne from $20,200 at the close on Monday. It has been boosted in days by supply fears. "Tin prices are trading at record highs this morning as supply problems from China, Indonesia and the Congo highlight market tightness while LME stocks have been on a general downtrend," Barclays Capital said in a note.
Stocks of tin LME warehouses have fallen by about 20 percent since the beginning of this year to 9,615 tonnes. Metals have been among the most profitable assets this year - copper hit an all-time high in early March and has gained 21 percent since the start of 2008 - as investors entered the market in search of alternatives to poorly-performing equities. But instability in global financial markets triggered by large losses at US banks has left metals vulnerable.
"In this uncertain environment we see the base metals likely struggling to hold rallies," J.P. Morgan said. "This is a view we are hoping for given that there is going to be very good value in copper towards $7500 a tonne, and in aluminium towards $2800 a tonne. Aluminium closed at $2,992 a tonne from $2,945 on Monday and zinc at $2,528 from $2,479. Nickel was up at $30,200 from $29,400 and lead gained to $2,949 from $2,900.