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In Asian trading this morning, base metals are trading mixed with Aluminum and Nickel slightly down while other metals are up by 0.2 percent at LME electronic platform. The Asian share markets are also trading mostly weak after the much eyed Chinese GDP release. As expected, Chinese GDP contracted to more than three years lows, (7.6%) however the worse got prevented as industrial production was in line with expectation and may support slight optimism. Riskier assets including base metals have declined in the recent past on expectation of de-railed Chinese economy.
The surprise was a much improved retail sales print in China and the disappointing Japanese industrial production, reporting in well below forecast, markets had expected a decline of 3.1% but actual showed a drop of 3.4%.
However, after today’s release in early morning, the situation improved slightly and may support buying as emerging economies including industrial production of India and China have remained intact and may spur gains.
Fundamentally, the inventories witnessed slight drawdown while the cancelled warrants have also increased slightly indicating downstream physical demand and may continue to support future prices. Further, Italy is scheduled to auction bond but, after recent down gradation the yields may continue to march northwards and weaken the shared currency extending losses to financial assets including base metals. From the economic data front, while the US producer prices may continue to deteriorate due to piling wholesale inventory and lower demand. Even the Michigan confidence is expected to remain weak and may continue to weaken base metals in today’s session. Increased divergence among metals has been witnessed in recent past and hence, constituent metals of the pack are likely to follow the same in today’s session.
Today, is expected to be a very light day in the currency markets, with little in eco data other then mentioned above, it was an Asian data day, but news flow will have some serious consequences. More should be heard on Italy and Spain in light of the rating downgrade of Italian government bonds by two notches.
Yesterdays, US unemployment numbers were pretty much in line with forecast and overall market neutral. A lot of press is looking and the season adjustments, but those numbers are used in the forecast and the actual so it is basically an even shake.