Base metals gained by more than 2 percent at LME as US payrolls data showed an increase followed by fall in unemployment. This supported the Dow Jones to post a gain of 1.23 percent supporting early gains at today’s Asian equities.
Today morning base metals are trading mixed at LME. The Chinese leading index has also improved slightly indicating growth in fixed asset investments and industrial product sales. The Chinese industrial activity has contracted as raw material costs have increased, however the property prices have gained slightly increasing Leading index to 100.25 from earlier 100.18.
This may have slight positive impact on metal prices. The metals pack may anticipate the ongoing Greece negotiation as most of the Equities have rallied post better US economic releases. In one hand the optimism over better US economic releases are supporting metal prices, while on the other hand, Greece negotiations expectations are pulling prices down.
The EU has approved 130 billion bailout funds to Greece but still as per present scenario the same may not be sufficient enough to bring down debt-burden on GDP by 9.1 percent. France is going for a bond sale worth 8.5 billion Euros, therefore Euro may remain fragile for the day, till any result of possible negotiation is struck through and base metals may also remain subdued.
The German factory orders are also expected to increase after better PMI releases and may support base metal prices. Hence today, Greece negotiations play a vital role and any deal struck by the policymakers may increase investor confidence and can support a gaining rally, however failure of the same may result in weak euro coupled with weak metals pack.
Keeping all concerns intact, we expect base metals to remain volatile for the day and moving between gains and losses in their range. Overall we recommend going for long positions at lower levels expecting some conclusion from Greece negotiations.
Aluminium
Aluminum prices gained 2.37 percent at LME, however at MCX gains were limited to 0.97 percent due to rupee appreciation.
Prices have gained with increase in volume and fall in open interest indicates bearish trend for the metal.
The contango is also maintaining at 37.75 highest in more than a year and may come down due to weak demand.
Copper
Copper prices came up by 2.64 percent at LME due to better payrolls data coupled with fall in US unemployment.
Concerns of fresh strike are lingering at the Escondida mine of BHP Billiton the largest Copper mine owned at Chile where workers are meeting the administration and would be of much interest for the day. It may support the gaining spree due to continued supply constrains.
Lead
Lead prices followed base metal pack and gained 2.82 percent at LME though inventories continued to stockpile at warehouses with reduced demand.
As European and Chinese manufacturing increased followed by gaining global equities prices may continue to gain slightly for the day, however European concerns and slower growth of developing nations have been an immediate threat for the metal.
Nickel
Nickel prices came up by 2.06 percent at LME though steel prices continued to add pressure to Nickel.
BHP Billiton may cut jobs and reduce mining temporarily at its Nickel West unit in Australia citing weak Nickel price.
Nickel prices are expected to trade range bound for the day and in near term the prices may remain similar as supply continues to outpace demand.
Zinc
Zinc prices came gained as US releases turned out to be a boomerang for the global economy.
The metal is a good indicator of economic activity and prices aligned with economic releases and better Euro-zone and US releases may continue to support the trend.
Courtesy:Karvy Comtrade Ltd.
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