Selling Recommended In Base Metals

Most of the base metals 3M forwards at the LME platform closed marginally higher in the range of 0.1% to 0.4%. The metal complex traded lower for the larger part of the day. However positive retail sales data from Germany and positive Trade balance data from the US where in the trade deficit narrowed down to -34.3 billion gave a boost to European and US equities and most of the base metals recouped their losses recovering from their intraday lows with Lead and Nickel underperforming the other metals. In the domestic markets base metals closed lower the range of 0.3% to 1.2% with further pressure coming from the overnight rupee forward which recouped its losses against the US dollar during the fag end of the session.

Global Market Analysis: It was a dollar play story over night when trade deficit unexpectedly narrowed. The USD index rose to 80.9 and the US equities posted a positive close last day. Coming to base metals, the 3M forwards at the LME platform are trading on a mixed note. Form an economic data perspective we have the ADP employment change number from US and likely that private payrolls may increase by another 200K while it had increased by 215K in the month of November. We also have factory orders from Germany for the month of November which might show some slight improvement and might limit the losses in the base metals. We have been carrying a mixed approach while we suggested selling in copper and Nickel. We wish to hold the same stance today on both while we need to be cautious while initiating a sell position in lead future contract

Base Metals Outlook: In the early morning session trade, base metals 3M forwards at the LME platform are trading mixed in spite of the positive cues from the Asian equities. Coming to the commodity specific cues, copper might take negative cues from the fact that the treatment and refining charges in China have increased to $125 per ton up from $120 per ton witnessed on 31st December 2013. Coming to nickel, we continue with our sell view on the commodity as there has been no change in its fundamentals and it continues to languish in a supply surplus situation and further pressure coming from Indonesia regarding the lack of clarity on the mining policy. We have a negative bias on lead and recommend selling the commodity from the higher levels as the Chinese government might put additIonal restrictions for purchasing new vehicles due to the high levels of air pollution in major cities in China.

Amongst others, we maintain a ranged view on aluminum. Overall, we hold a mixed approach on the base metals and recommend selling from the higher levels in select base metals like copper, nickel and lead during the day.