Base Metals Weigh Down on Global Economic Worries

After trading higher initially, base metal pack pared most of their gains to end with marginal change of half to one percent.

PMI numbers from euro zone came in lower and remained in the contraction territory. ADP employment report from US indicated better than expected job additions in the month of October.

In the FOMC meet Fed chairman indicated that economic conditions continue to remain weak. It revised its forecast of economic growth lower towards 1.6 -1.8 percent.

Also it expects the labour market to remain weak and thereby unemployment situation might worsen.

US equity markets ended higher with gains of more than a percent. However later, reports indicated that Greece might not get any funds until the country takes up the proposal outlined last week. This is weighing on the sentiment and is only increasing the uncertainty surrounding the Euro zone.

As a result, most of the Asian equity markets are trading lower with losses of anywhere between half to one percent. Euro is also trading down with losses of 0.3 percent as the uncertainty continues to weigh on markets. In the morning session on LME, base metal prices are trading mixed with copper trading down by more than a percent while other metals are trading modestly higher.

On the economic data front, ECB is expected to leave interest rates unchanged at 1.5 percent however assessment of the current situation along with any other additional measures that the central bank takes up would be keenly watched.

In US, jobless claims are expected to decline while the ISM manufacturing numbers are expected to improve while factory orders might remain under pressure. Overall, given the concerns of the Greece bailout plan looming, base metal prices are expected to remain under pressure.

Aluminium

Aluminium stocks from London Metal Exchange witnessed draw-downs of 1,350 tonnes as against unchanged position on the previous day.

Slowly drifting cancelled warrant ratio was indicating slower draw-downs in the near term and that is expected to continue.

Open interest continued to increase for second consecutive day. On MCX it increased by more than 23 percent indicating build-up of short positions.

Copper

Copper stocks on London Metal Exchange witnessed draw-downs of 1,475 tonnes as against decline of 9,625 tonnes on the previous day.

On the fundamental front, Antofagasta, Chilean based miner, has reported copper production of 165,000 tonnes in Q3 2011 as against 140,700 tonnes in the same period of previous year.

Cancelled warrant ratio has declined further but still stands close to 11 percent of total stocks indicating that draw-downs might continue in the near term.

Lead

Lead prices increased by more than two percent on LME while in Indian markets it ended largely flat.

Lead stocks from London Metal Exchange warehouses witnessed draw-downs of 825 tonnes as against decline of 375 tonnes on the previous day.

Cancelled warrant ratio has however moved further higher and stands at close to six percent of total stocks indicating that in the near term draw-downs might continue.

Nickel

Nickel prices ended lower with losses of more than 1.4 percent in Indian markets thereby underperforming for second consecutive day.

Nickel stocks on London Metal Exchange witnessed draw-downs of 138 tonnes as against build up of 168 tonnes on the previous day.

On MCX, open interest increased by 40 percent alon with decline in prices indicating build-up of short positions.

Zinc

Zinc prices ended higher with gains of 0.7 percent on LME while in Indian markets it ended largely flat.

Zinc stocks from London Metal Exchange witnessed draw-downs of 4,100 tonnes as against decline of 3,600 tonnes on the previous day.

Cancelled warrant ratio continues to remain stable at close to 10 percent of total stocks indicating that draw-downs might continue. Open interest witnessed modest change of 6 percent on MCX.