During the month of November we have seen reasonably steady metal prices in AUD terms. Markets have seen a slight increase over the last week, however as we have seen on many occasions, any substantial gains have been softened by the strengthening of the Australian dollar, currently trading around 1.0415.
As the month progresses, we expect demand in the physical market to decrease due to the Christmas shutdown period, this inevitably takes any upward pressure off pricing with traders historically preferring to wait until the new year to see what direction 2013 markets take.
**** DJ BASE METALS: LME Metals End Mostly Higher; Shrug Off Weak Data **** By Francesca Freeman
Base metals were mostly a touch higher at the close of London Metal Exchange floor trading Monday, as investors shrugged off weaker-than-expected manufacturing data from the U.S.
Regional economic data offered base metal market participants mixed signals Monday, with Chinese manufacturing data beating expectations and U.S. manufacturing data undershooting forecasts. China’s official Purchasing Managers Index for November rose to a seven-month high of 50.6 compared with 50.2 in October. HSBC’s final China PMI reading for November, meanwhile, was 50.5 compared with 49.5 the previous month. A reading above 50 indicated expansion in manufacturing activity.
In the U.S., the Institute of Supply Management’s November manufacturing PMI fell to a more than three-year low at 49.5, versus 51.7 in October and an expected reading of 51. Base metals were “rather unfazed” by the weaker-than-expected U.S. data, particularly since the ISM’s reading may have been adversely impacted by Hurricane Sandy, which hit the Eastern seaboard of the U.S. last month, said Sucden Financial analyst Jack Pollard. Still, base metal trade is likely to remain cautious ahead of U.S. nonfarm payroll data Friday, said Mr. Pollard. “We’re also still hearing mixed comments regarding the fiscal cliff which is hampering risk appetite,” he added.
Discussions continue in Washington D.C. to avert the so-called ‘fiscal cliff’–a combination of tax increases and spending cuts that will start in January if lawmakers are unable to reach agreement on how to avoid it. Talks between Republicans and Democrats appeared to have come to a stalemate last week.
Since base metals are used widely in construction and manufacturing, market sentiment tends to be particularly sensitive to wider economic growth expectations.