MARKET COMMENTARY
The manufacturing PMIs for December showed ongoing strength in the US and rebounds in China and India. However, weakness persists elsewhere in Asia, and of course in Europe which is where the main focus of concern for the coming year still lies. However, with January and February PMI figures clouded by the timing of the New Year holiday, it is a bit of a waiting game as far as Chinese economic data is concerned, with early April, and the release of the March PMI, the point at which better clarity may start to return in terms of the state of the Chinese PMI and underlying economy.
The base metals continue to react to wider macroeconomic factors, with firmer European equity markets. The flow of money, from the ECB lending facility to the banks and finally back into European sovereign bonds appears to have started, on the basis of auctions, easing some of the immediate fears over the Eurozone debt crisis. It is still a case of symptoms being addressed, however, rather than the underlying condition being cured, with the spectres of sovereign debt and capital adequacy at European banks stil overhanging the market.
Copper, which sagged 22 percent in 2011 and was traded between $7,131-$7,995 a metric ton in Dec, steadied this morning, following small losses in Asia, as European markets found firmer footing on the basis that the credit rating cut for nine euro zone nations by agency Standard & Poor's was already priced in. Three-month copper traded at $8,055 a tonne by 0944 GMT, from a last bid of $8,000 on the London Metal Exchange kerb close on Friday. Prices are up 6 percent so far this year.
"The downgrade hasn't come as a surprise. It was mooted on Dec 5," said Daniel Briesemann, an analyst at Commerzbank. “But because of new year holidays in China, the market will cool down and with the low liquidity we should also see lower interest and probably lower prices," he added. Prices had declined in Asian trading because of a lack of purchases by Chinese consumers before the start of a week-long holiday in the world's largest user of the metal, and investor concern that European markets may tumble in reaction to last week's ratings downgrade.
Speculators in copper remained bearish, a bet they have held on to for almost 20 weeks, as demand prospects continued to be clouded by Europe's debt crisis and signs of slowing growth in top consumer China, U.S. Commodity Futures Trading Commission (CFTC) figures showed on Friday. They increased those shorts by 454 contracts to 2,465 lots.
Goldman Sachs said on Friday it expected upside for copper prices, citing greater supply risks and stronger fundamentals. But Standard Bank said it expected prices to fall, citing the sovereign debt crisis in Europe and the potential it will produce fallout around the world.
The manufacturing PMIs for December showed ongoing strength in the US and rebounds in China and India. However, weakness persists elsewhere in Asia, and of course in Europe which is where the main focus of concern for the coming year still lies. However, with January and February PMI figures clouded by the timing of the New Year holiday, it is a bit of a waiting game as far as Chinese economic data is concerned, with early April, and the release of the March PMI, the point at which better clarity may start to return in terms of the state of the Chinese PMI and underlying economy.
The base metals continue to react to wider macroeconomic factors, with firmer European equity markets. The flow of money, from the ECB lending facility to the banks and finally back into European sovereign bonds appears to have started, on the basis of auctions, easing some of the immediate fears over the Eurozone debt crisis. It is still a case of symptoms being addressed, however, rather than the underlying condition being cured, with the spectres of sovereign debt and capital adequacy at European banks stil overhanging the market.
Copper, which sagged 22 percent in 2011 and was traded between $7,131-$7,995 a metric ton in Dec, steadied this morning, following small losses in Asia, as European markets found firmer footing on the basis that the credit rating cut for nine euro zone nations by agency Standard & Poor's was already priced in. Three-month copper traded at $8,055 a tonne by 0944 GMT, from a last bid of $8,000 on the London Metal Exchange kerb close on Friday. Prices are up 6 percent so far this year.
"The downgrade hasn't come as a surprise. It was mooted on Dec 5," said Daniel Briesemann, an analyst at Commerzbank. “But because of new year holidays in China, the market will cool down and with the low liquidity we should also see lower interest and probably lower prices," he added. Prices had declined in Asian trading because of a lack of purchases by Chinese consumers before the start of a week-long holiday in the world's largest user of the metal, and investor concern that European markets may tumble in reaction to last week's ratings downgrade.
Speculators in copper remained bearish, a bet they have held on to for almost 20 weeks, as demand prospects continued to be clouded by Europe's debt crisis and signs of slowing growth in top consumer China, U.S. Commodity Futures Trading Commission (CFTC) figures showed on Friday. They increased those shorts by 454 contracts to 2,465 lots.
Goldman Sachs said on Friday it expected upside for copper prices, citing greater supply risks and stronger fundamentals. But Standard Bank said it expected prices to fall, citing the sovereign debt crisis in Europe and the potential it will produce fallout around the world.
