MEIR ON METALS: European leaders forge agreement, but markets remain skittish
Dec 09, 2011 | 11:26 AM
Analyst Ed Meir looks at what is moving the metal markets on Friday.
Copper and general commentary: We headed broadly lower in synchronised fashion on December 8, as a wave of European-inspired selling hit most markets hard.
Energy and precious metals both finished lower, as did the US stock market, with the Dow losing almost 200 points on the day. In base metals, copper headed for its largest daily loss in two weeks, dragging the rest of the metals down with it.
Remarks made by European Central Bank (ECB) head Mario Draghi during a rate-reducing press conference were behind the decline after he unexpectedly dashed hopes that the central bank was going to play an instrumental role in the continuing European debt crisis.
Draghi said that his earlier remarks about a “fiscal compact” were misinterpreted, and that the ECB could legally not engage in “monetary financing”, meaning that the markets should not expect it to be a continuing buyer of distressed debt.
In our view, this was an unfortunate choice of words relayed at the wrong time, given that the ECB has been buying bonds for its own account for some time now; to flatly deny that it would engage in such action a day before a major summit only contributed to the confusion and aggravated the selloff.
If Draghi’s comments were instead meant to pressure wavering European politicians, that tactic seems to have worked – in a way.
After an all-night session, the Europeans have emerged with an....
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