MARKET RECAP Base metals ended in the red on Monday as financial market mood weakened on concerns that the world economies are sinking into an intensifying recession. The crisis is expected to continue well into 2009 as much the developed world is expected to remain in recession. Since the developed countries are facing a crunch, the developing nations that depend on exports to these countries will also be hurt. Hence, all these concerns are leading to fears of lower demand in times of weakening global economic situation. Since trade takes place on a global level, the crisis is into a two way street where no one can escape the effects of a massive pile up.
Aluminum prices sank to a new 3-1/2 year low as the metal faced pressure of a sharp rise in LME inventories by 20,850 tonnes yesterday. Lead prices too touched a multi-year low. The overall base metals pack came under selling pressure as the economic picture has deteriorated further. In the earlier part of the day, short-covering prompted by China’s Yunnan province’s stockpile news lead metals higher. But they ran out of steam due to skepticism by market players over this plan.
On the macroeconomic front, the US ISM Index declined to its lowest since 1982, and Eurozone manufacturing activity sank to a new record low in November. Japanese new car sales fell declined and all these negative economic data created weak sentiments for base metals.
OUTLOOK The deteriorating macroeconomic outlook has weakened sentiments in financial markets across the globe. Demand concerns are leading to pressure on base metals amid a situation of rising inventories. Currently, various bearish factors are acting together and have hence added pressure. But a pick up in China’s physical demand could ease the situation by 1HFY2009.
Copper inventories are rising steadily and this situation indicates that the demand is weak. However, the metal has strong support as it has managed to trade above its marginal cost of production. This indicates that markets are bullish on the prospects of the metal in the near future. Aluminum prices are facing the pressure of falling crude oil prices as a decline in oil prices would mean lower cost of producing primary aluminum. This reduces concern over supply of aluminum in the market.
On the macroeconomic front, the US is expected to announce data on auto and truck sales today. Is this data is released on the weaker side then base metal prices could come under pressure.
Copper
Copper prices have been trading range bound for past few trading sessions with immediate support seen at Rs.184.5 levels for MCX Feb contract. Further below, support is seen at 180.20 levels.
Whereas resistance is seen at Rs.187.20 levels & further upwards at Rs. 189.80.
Zinc
Immediate support is seen at Rs.58.50 levels for MCX December contract whereas crucial support is seen at Rs.56.75 levels. Short-term resistance is seen at Rs61.50 whereas major resistance is seen at Rs 63.55.
Courtesy: Angel Commodities
