Metal markets are trading reasonably steady on the world stage, with the major indices of Copper & Aluminium trading within a range of less than 2.5%.
In local terms (and perhaps partly due to the confidence the new Government has brought with it) the Australian dollar is on a northward run with the HSRA rate beginning the month at around 0.8936, now trading at 0.9324.
**** DJ Base Metals Likely Sideways Ahead Of Fed Meet ****
By Arpan Mukherjee @ wsj.com
GMT [Dow Jones] LME base metals could move sideways lacking a clear direction ahead of the Federal Reserve’s two-day policy meeting that starts Tuesday. Some worry that without the Fed’s monthly $85 billion bond buying program, business activity will sputter, leading to less demand for industrial metals like copper. The Fed meeting will be “the main focus of the wider global markets, the complex is likely to continue drifting sideways until some clarity emerges of the timing and scale of any tapering,” Standard Bank analyst Leon Westgate says in a report.
**** DJ Base Metals Mixed Ahead of FOMC Meet, Hold Tight Ranges ****
By Laura Clarke
Base metals on the London Metal Exchange were mixed and bound within recent ranges Monday as investors cautiously awaited news this week about the future of the U.S. Federal Reserves quantitative easing program.
The Fed’s policy-setting committee begins its two day meeting on Tuesday. Its quantitative easing program has supported demand for base metals, and by extension has supported base metal prices.
“The markets are waiting for Wednesday’s decision of the U.S. Fed as regards the scaling back of bond purchases,” said Commerzbank base metal analysts in a note. “Were the reduction to be hesitant or indeed postponed to December, metals would likely find support.” The decision is due at 1800 GMT Wednesday. Commerzbank analysts noted that within the past few weeks, investor positioning on copper has likely turned negative.
However, the German bank said restocking of metal in China is of greater significance and is likely to lift prices. The nation is the world’s top base metal consumer, accountable for 40% of global copper demand alone. “We expect metal prices to recover soon on the back of stronger Chinese growth,” it said. This sentiment was echoed by exchange-traded fund provider ETF Securities.
“Concerns about a Chinese economic slowdown weighed on the outlook for demand early in the year,” said Martin Arnold, Director of Research at the firm in a report Monday. However, “fears of a ‘hard landing’ have been overdone. China’s recent robust economic numbers highlight its voracious appetite for raw materials, which will continue to provide support for industrial metals prices,” he added, noting data indicating that Chinese producers have recently bought industrial metals opportunistically, taking advantage of lower prices to rebuild stockpiles. At the same time, he said improvements in U.S. and European industrial growth would also lend support to metal prices.