Base Metals Settle Lower on Negative U.S. Data

Base metal prices retreated by 0.1 to 2 percent as weak Euro-zone coupled with negative data releases from US in the form of advance retail sales and business inventories have toiled on metal prices. Aluminum was the only metal to close slightly positive as better auto sales and forecast along with declining smelting activity has resulted in gains.

Today morning metals are trading positive by nearly a percent at LME electronic platform. The Asian equities are also trading positive ahead of the extraordinary meeting of the Euro-zone finance ministers. The Japanese yen has also depreciated by 1.12 percent supporting gain to the export oriented economy.

Presently Euro is trading slightly positive due to primarily three reasons; the bond yield of Spain and Italy has depreciated after successful bond auction, anticipation over extraordinary meeting and finally weaker Dollar index supporting gains in Euro.

Hence Euro is expected to remain mostly on the higher side supporting gains in metals; however slight pressure may be witnessed during the economic data releases as GDP is expected to contract further along with narrow trade balance may weigh on the single currency.

Greece may have done their part by passing the austerity bill but whether it will be bailed out needs to be closely followed for the day. From the US, the senate has passed payrolls tax cut and extended unemployment benefit widening the gap after deficit budget presentation.

Pressure on Dollar index is probably because of this and may continue for the day. However the economic releases in the form of Empire manufacturing and industrial production are expected to increase extending gains to Dollar as well as base metals.

The total net TIC flows are also expected to increase as investors might rely on the largest economy of the World. Therefore we expect base metals to recover as positive equities along with anticipation over Euro-zone may continue to support and recommend to buy at lower levels for the day.

Aluminium

Aluminum prices gained 0.23 percent at LME and slight gain of 0.18 percent was witnessed at MCX too United Co. Rusal – World’s largest Aluminum producer has forecasted to reduce production supporting price gain.

Fundamentally the demand has improved compared to previous sessions, however since the market continues to enjoy surplus downside risk gets limited due to increased production cost.

Copper

Copper prices came down slightly by 0.12 percent at LME and by 0.31 percent at MCX.

Philippines plans tighter mining rules to add revenue by introducing competitive bidding and ensuring environment friendly smelting techniques, indicating increase in future cost of production for refined metals and may have slight positive impact on Copper prices.

Copper prices are expected to march northwards due to better equities coupled with increased sentiment over Euro-zone.

Lead

Lead prices retreated consecutively for the third day by 1.91 percent at LME. Weak European sentiment and down gradation has put pressure on metal prices.

Lead inventory has witnessed stockpiling however cancelled warrants have improved slightly indicating better spot demand.

However today prices may bounce back due to increased open interest as traders are holding position expecting prices to recover.

Nickel

Nickel prices too came down by 1.95 percent at LME and by 1.81 percent at MCX.

The contango is expected to narrow down as prices continue to remain bearish, followed by increase in volume and open interest.

Nickel prices may continue to remain under stress, however slight recovery may be witnessed later during the day due to better economic releases from US.

Zinc

Zinc was the top loser for the day and prices came down by 2.05 percent at LME and by 1.08 percent at MCX.

Inventories have witnessed stockpiling and are maintaining at record levels in last two decades; cancelled warrants have declined for the ninth consecutive session indicating weak spot demand.

Prices are expected to mostly remain sideways due to weak spot demand, however better automobile forecast may continue to support downside.