Base metals retreated consecutively for two days as German retail sales dropped followed by deterioration of consumer confidence in US. The metals pack was mostly trading positive as the Asian and European equities were buoyant however due to glooming economic outlook coupled with contraction in profits of manufacturing and mining firms, base metals closed downside.
Today morning metals are trading slightly negative by 0.2 to 0.9 percent at the LME electronic platform. The Asian equities are trading positive as Chinese PMI manufacturing numbers increased indicating slight better outlook.
However the HSBC PMI manufacturing contradicted with that of government with fall in export due to weak demand from Euro-zone and US. Even home grown Inflation and high property prices in China have also contributed negatively and may need some monetary easing to revive growth path.
Fundamentally metal inventories have witnessed slight drawdown; however the cancelled warrants have declined indicating weak demand. Vedanta Plc reported a fall in profits for the third quarter yesterday as its Copper and Iron-ore business contracted due to weak demand followed by Arcelor Mittal.
The Euro crashed 0.46 percent as treasury yields continue to skyrocket increasing borrowing cost for member nations. From the economic data front a host of PMI releases are expected to be positive from the Euro area. Even the US releases of manufacturing and prices paid are expected to be positive and may support plummeting metal prices.
However the construction spending may continue to contract followed by slight change in ADP employment. Therefore metals may have a mixed impact from economic releases. Overall due to weak global outlook followed by lack of strong policy formulation we recommend going short with metals pack for the day.
Aluminium
Aluminum prices retreated 1.80 percent at LME and prices came down by 1.02 percent at MCX.
The inventory has also witnessed slight drawdown but cancelled warrants have also decreased to 19.37 percent indicating fall in spot demand.
The open interest has also increased and due to better PMI data coupled with increased aero-space demand, the prices may remain bullish.
Copper
Copper prices consecutively retreated for the day by 1.29 percent at LME and it came down by 0.96 percent at MCX.
The inventory has witnessed drawdown and the cancelled warrants are also increased to 29.37 percent.
Fundamentally the red metal is strong but still the prices came down with a fall in open interest due to global economical concerns.
Lead
Lead prices followed the same and prices retreated at both LME and MCX by 2.25 and 2.36 percent respectively.
The inventory has witnessed stockpiling and warrants have also declined to 12.78 percent indicating slight fall in demand.
Nickel
Nickel prices came down by 2.11 percent at LME and similar trend was witnessed at MCX too.
The inventory has witnessed drawdown and cancelled warrants have increased to 4.02 percent indicating spot demand.
Nickel prices may remain buoyant as manufacturing and production activities ramping may support the trend.
Zinc
Zinc prices came down by 0.89 percent at LME and at MCX the prices retreated by 0.95 percent.
The cancelled warrants have been reducing day by day and presently is the lowest among all metals at 2.13 percent indicating poor spot demand.
Fundamentally the metal is weakest and may continue to follow the base metals pack.
Courtesy: Karvy Commtrade Ltd.
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