MEIR ON METALS: Markets settle down in quiet trading after Monday’s drubbing

Dec 13, 2011 | 09:45 AM |

Analyst Ed Meir looks at what is moving the metals markets on Tuesday. 

Copper and general commentary: Synchronised selling was again evident as we started the new week, as growing doubts about Friday’s euro-plan, whose many shortcomings we outlined in Monday’s column, coupled with fears about an imminent slowdown in China, combined to hit the markets hard.

In individual sectors, metals were pummeled, with copper sinking to a two-week low and triggering a sizable retreat in the rest of the group. In addition, gold, energy and the euro all retreated, with the latter crashing to an eight-week low of $1.3164 against the dollar. US stocks also fared poorly – the Dow Jones Industrial average was off by more than 220 points at one stage before paring its losses slightly by the close.

The complex that garnered the most attention – and rightfully so – was the European bond market. Yields moved up across the board on Monday, in effect rendering a vote of no confidence in Friday’s European plan and setting the stage for the subsequent retreat that followed. Italian one-year yields, for example, stayed close to their record highs, while rates on the country's ten-year bonds briefly neared the 7% level before pulling back.

The rating agencies aggravated the situation further by piling on (and, of course, being late as usual to the party). In this respect, both Fitch and Moody’s said that they might downgrade a number of countries given the lack of a “comprehensive” solution to the debt issues.....