Base metals rise on China data

Last Updated: Thu, Aug 22, 2013 21:30 hrs

Base metals traded on a positive note on Thursday, due to favourable manufacturing data from China and the Euro zone, raising thereby hopes for a boost in their consumption.

Copper moved up 1.4 per cent to $7,340 a tonne. Lead and zinc followed, to settle with a gain of about 0.3 per cent each on the London Metal Exchange (LME). Aluminium moved up by about the same proportion from the previous close. Positive growth in the economy boosts investment on infrastructure,  translating to higher base metals’ consumption. Being one of the largest consumers, infrastructure is the key for base metals’ price movements across the world.

“After moving broadly within a narrow range for a while, base metals moved in a positive territory on Thursday, supported by positive Chinese economic data. A positive sentiment emerged after similar data released by Euro zone and US economies, which gave an indication of a turnaround in their economies,” said Dharmesh Bhatia, an analyst with Kotak Commodities Services.

Favorable manufacturing data from China and the euro zone raised hopes of recovery in the world markets. Copper touched an intraday high of $7,389 and hovered around $7,383.25. A marginal decline in inventories of base metals was seen, except for lead. Owing to this, the gain in LME lead prices was the least. On the Multi Commodity Exchange in India, depreciation in the rupee supported an additional upside in the prices.

The HSBC Flash Manufacturing Purchasing Managers Index (PMI), an indicator of new factory orders, in China hit a four-month high of 50.1 in the month from a final reading of 47.7 in July, moving above the 50 threshold that demarcates expansion of activity from contraction. This indicates the key manufacturing sector has recovered strongly in August. Apparently, the government of China has announced a series of measures to boost the slowing economy, including scrapping taxes for small firms, offering more help for ailing exporters and boosting investment in urban infrastructure and railways, resulting in higher consumption of base metals.

Data compiled by the Angel Broking showed that the French Flash Manufacturing PMI remained unchanged at 49.7 in August. The German index rose by 1.3 points to the 52-level in August from 50.7 in July. European Flash Manufacturing PMI increased to 51.3 in August from 50.3 in July.

Reena Rohit, chief manager (non-agri commodities and currencies) at Angel Broking, forecast base metals would trade higher in the near future. Spot gold prices traded on a positive note and gained around 0.2 per cent in early Thursday trade in the futures market on the back of upbeat global market sentiments. However, a sharp upside was capped as a result of a decline in holdings of the SPDR Gold Trust, the world’s largest exchange-traded product backed by the metal,, coupled with strength in the dollar index. In the Indian markets, depreciation in the rupee supported prices.

Standard gold, despite the positive trend, moved a marginal 0.2 per cent down to close at Zaveri Bazaar at Rs  31,440 for 10g. Silver moved up 0.9 per cent to settle at Rs 51,960 a kg.

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