Analyst Ed Meir looks at what is moving the metal markets on
Friday 27 April.
Copper and General Commentary:
finished sharply higher on Thursday, as the lingering
after-effects of Chairman Bernanke's comments continued to
pressure the dollar, forcing it to slide to $1.3263 against the
euro - a three-week low. Other markets saw good gains as well;
precious metals and US equity markets both finished higher,
with stocks putting together their best three-day gain since
February amid decent earnings reports.
Right now, markets are mixed, with base metals recovering from
early losses and now modestly higher, but precious metals and
energy are both down. The euro is steady at $1.3230 and US
stocks are expected to open flat.
Some of Friday's buy-side momentum has been knocked back on
reports out late Thursday that S&P downgraded Spain's
credit rating by two notches, citing "a challenging fiscal
outlook". S&P cited the worse-than-expected deterioration
of the country's budget and a growing likelihood that the
government will need to provide aid for the country's banks
that have been hit hard by mounting real estate losses.
If this were not enough, the government also reported today
that Spain's unemployment rate shot up to 24% in the first
quarter, while retail sales slumped for the twenty-first
consecutive month. "Spain is in a crisis of huge proportions,"
Foreign Minister Jose Manuel Garcia-Margallo said in a radio
For his part, the country's economy minister had to again deny
reports that the country was seeking outside help. "Nobody has
asked Spain, either officially or unofficially" to turn to
Europe's bailout mechanisms, he said in an interview late
yesterday. "We don't need it."
Out of the US, we just got first quarter GDP figures, and this
came in at 2.2%, less than the 2.5% consensus. Markets seem to
be taking the number in stride so far, with its slightly
bearish impact on commodities being offset somewhat by the
possibility that the dollar could now weaken.
Out of Japan, the government reported that industrial
production rose less than forecast in March, further
strengthening the case that economic growth could slow later
this year. Output was up only 1% from February compared with a
2.3% median forecast. A separate release showed consumer prices
rising 0.2% from a year before, exceeding estimates.
Out of China, the Chinese central bank guided the yuan to a
record high for a second straight day today. The dollar/yuan
rate is now at 6.2787, its highest since 2005. The move comes
after Treasury Secretary Geithner said on Thursday that China
hasn't gone far enough in its efforts to open its economy or
allow its currency to appreciate, outlining key concerns ahead
of a Chinese summit.
Also out of China, there is a good Bloomberg article on the
country's real estate sector and the government's efforts to prop up activity
through low income housing
. There is also a companion piece
in today's Wall Street Journal on the state of the US housing
Technically, we are now at $8,370 on copper, up $50, and off by
about $20 after the GDP number came out. LME stocks continue to
decline, off another 3,500 tonnes overnight, with cancelled
warrants around 39%. Tom/next was quoted at $10 back, trading
between $3 and $12 earlier, while the cash-to-three's spread
was last quoted at $135-$145. COMEX looks quite strong as well,
with both the 100-day and 20-day moving averages taken out as
of Thursday's close.
Ali is now at $2,111, up $25 and
about where we were at this time on Thursday.
Zinc is at $2,038, up $1 and fairly
quiet today with roughly a $25 trading range in place. There is
modest resistance around the $2,050 mark.
Lead is at $2,134, up $12.
Nickel is at $18,400, up $200.
Tin is at $22,500, up $190.