Base metal prices gained yesterday after the Euro-zone finance ministers were convinced to provide bailout to Greece as the same has agreed to austerity measures to control debt.
Financial markets were rejoiced and closed mostly in gain as the ECB kept the interest rate unchanged and “Euro” appreciated by 0.20 percent against the greenback.
Today morning base metals are trading negative by almost 0.2 to 0.8 percent at LME electronic platform.
The Asian equities have also retreated as international backers called for ratification of reforms before releasing any bailout funds to Greece. Greece has to approve a long awaited austerity agreement in order to get second bailout, but as of present developments EU ministers refused to sign off second aid till Greek parliament approved austerity undertaking and economic reform.
This may bring in political unrest and result in social sabotage impacting negatively on Euro. Hence we expect euro may remain mostly weak during the day. The Chinese trade balance has also contracted with declining imports and export numbers supporting the downtrend of Asian equities.
The economic data releases from Germany in the form of inflation may remain same and this may impact negatively on Euro. Further the US releases in the form of trade balance and Michigan confidence are also expected to come down and may weigh on Dollar index.
Workers at the world’s largest exporter BHP Billiton's coking coal mines in Australia are going on strike for seven days from 15 February after rejecting pay offer.
The Queensland mine is the world’s largest exporter of steel making coal and hence metal prices may gain due to tight production conditions and high raw-material prices. ’Therefore for today we expect base metals to trade slightly downside as markets open.
However we expect prices may continue the gaining spree and recommend going long at lower levels due to increased supply constraints and Greece optimism.
Aluminum prices gained 1.58 percent at LME and prices came up by 1.68 percent at MCX
Alcoa is reducing its smelting capacity by closing operations at yet another smelter in Victoria in Australia citing higher energy costs and strong Aussie with low metal prices may support price gain for the day
Moreover with low gain in prices when compared to Copper, Aluminum is gradually substituting Copper for wire by manufacturers may also support price gain
COPPER
Copper prices continued the gaining spree and at LME it gained 2.10 percent and at MCX prices came up by 2.18 percent
Fundamentally, the Chinese demand has been weakest since 2006 and government subsidy has also ended for metals reducing their consumption demand may impact slight negatively on prices
Copper may trade range bound during the day, however slight gain might occur due to bullish trend
LEAD
Lead prices gained 1.88 percent at LME and it came up by 1.63 percent at MCX after retreating yesterday
Lead inventory has witnessed stockpiling and cancelled warrants have also declined slightly indicating weak spot demand
However today prices may retreat due to fall in volumes and open interest along with weak cancelled warrants
NICKEL
Nickel prices came up slightly by 0.12 percent at LME and at MCX prices gained 0.57 percent
Supply constrains has added after BHP closed entire operation at 5 Nickel mines at Sudbury however the spot demand has been weak
Prices may continue to gain due to higher auto forecast from Toyota along with increasing supply disruptions
ZINC
Zinc prices gained the most among all base metals coupled with higher volumes indicating bullish trend
Inventories have witnessed stockpiling and cancelled warrants have declined for the sixth 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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