Base metal prices retreated due to uncertainty over the Greece bail-out over the parliament approval after the so called Troika asked for turning the austerity measures into law. The financial markets retreated as concern regarding the single currency Euro and its viability came into question. The metals pack was no exception and prices retreated by 1.9 to 3.8 percent at LME.
Today morning base metals are trading positive by almost 0.2 to 1.2 percent at LME electronic platform. The Asian equities are also trading slightly positive.
The markets have resumed their gaining spree post the Greek parliament passed the austerity bill in order to escape the debt default ahead of March 20. Leaders from Greece convinced the Troika for bailout after they passed the austerity and budget deficit control bill in the parliament.
Due to this Euro strengthened by almost 0.26 percent and may continue the same for the day. Markets will eye the extraordinary meeting of Euro-zone leaders on Wednesday, where Greece needs to get its austerity bill signed by other party leaders and flesh out 325 million Euros through spending cuts.
Therefore any new developments may support price gain and may also push base metal prices northwards. The GDP of Japan has contracted due to higher Yen coupled with economical damage from flooding in Thailand. However the equities markets remain buoyant and may close in the positive territory for the day.
The Peoples Bank of China may be more cautious to loosen its monetary policy amid complexity and dwindling metals demand. Government subsidy for new vehicles and appliances are also due and may be expected soon as metal stocks continue to pile at Shanghai warehouses since last two months. Philippines may also implement tighter mining rules and increase taxes to protect the environment and this may continue to support prices of Copper and Nickel due to increase in production cost.
The German Wholesale price index is expected to remain mostly subdued and therefore we recommend going short for base metals at higher levels for the day. However with Greece parliament approval coupled with reduced margin requirements from Chicago Mercantile Exchange prices may continue the gaining spree for the day.
Aluminium
Aluminum prices retreated 1.97 percent at LME and prices came down by 1.21 percent at MCX.
Moreover with low gain in prices when compared to Copper, Aluminum is gradually substituting Copper for wire by manufacturers may also support price gain in the near term.
Fundamentally the demand has improved compared to previous sessions, however open interest and volume are low at MCX and may limit the gains in domestic market.
Copper
Copper prices came down by 3.18 percent at LME and similar loss of 2.30 percent was witnessed at MCX.
Chicago Mercantile Exchange (CME) has reduced the margin requirements by 13 percent effective from today’s end of the day. This may support price gain in the short term.
Lead
Lead prices retreated most by 3.87 percent at LME. Weak European sentiment has toiled on metal prices.
Lead inventory has witnessed stockpiling and cancelled warrants have also declined slightly indicating weak spot demand.
However today prices may gain slightly due to better euro-zone confidence post Greece parliament approval.
Nickel
Nickel prices too came down by 3.81 percent at LME and 3.40 percent at MCX ahead of strike and production disruption.
Fundamentally the inventory has witnessed drawdown and cancelled warrants have also improved indicating spot demand, however I the long run Nickel market may continue to enjoy surplus and remain bearish.
Zinc
Zinc prices followed base metals pack and prices came down by 3.80 percent at LME and by 2.59 percent at MCX.
Inventories have witnessed stockpiling and cancelled warrants have declined for the seventh consecutive day 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.
Courtesy: Karvy Commtrade Ltd.
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