Base Metals Recoup Losses

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Base Metals Recoup Losses

Base Metals Recoup Losses

Early on Thursday base metals were trading positive by 0.18 to 0.28 percent at LME electronic platform. The Asian equities have paired in losses after remaining week for the last three days supported by weaker greenback and positive sentiments after the FOMC. Riskier assets including base metals are likely to gain in today’s session amidst better US economic releases and improving Asian manufacturing activity including China.  During the Asian session on Wednesday, China’s HSBC Flash PMI increased from the previous month to 49.1, still below the 50 to show expansion but a positive increase. Also yesterday, US Fed reserve said it is keeping its bond-buying program until the job market improves. It added that the economy was slightly firmer but the unemployment rate remained elevated. Euro-area services and manufacturing output contracted more than economists forecast in October and German business confidence dropped to the lowest in more than 2-1/2 years as Europe’s recession deepened.

Industrial metals prices closed near six-week lows yesterday as the dollar rose and investor sentiment soured on weak euro zone data, but signs of recovery in top metals consumer China limited losses.

Copper closed near 6-week lows, as the dollar rose and investor sentiment soured due to poor euro zone economic data; however signs of recovery in top metals consumer China limited major losses.

China’s implied consumption of refined copper increased 6.9 percent in September from the previous month, fuelled by higher imports, and extending a rise seen in August, according to Reuters calculations based on official data released on Wednesday. The U.S. Securities and Exchange Commission has delayed for a second time a ruling on JPMorgan Chase & Co’s controversial plan to launch an exchange-traded fund (ETF) physically backed by copper.

The European Commission is investigating whether Chinese producers of aluminum foil are evading anti-dumping duties imposed by the European Union in 2009, it said yesterday. The global lead market was in surplus by 80,000 tons in the first 8-months of the year 2012 while global zinc market was in surplus by 128,000 tons in the same period.

From the economic data front, the UK GDP is likely to improve due to higher economic activity during the 2012 London Olympics while the US releases may continue to improve at a moderate pace and may support gains in base metals in the evening. Higher US durable goods order and better pending home sales along with Chicago Fed national activity index may continue to lift investor sentiments and support gains in riskier assets. Hence, weakness in base metals is likely to be witnessed only in the case of strengthening local currency and weak Euro-zone developments. However, after yesterday’s comments of ECB chief Draghi’s stance for bond purchase might limit the downside in the European sentiments and may continue to lift base metals. 

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About: FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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