The base metal complex recovered from the earlier blows and prices moved higher due to supportive data releases and dollar index paring some gains. Later evening, China ordered banks to set aside more funds as reserves (revaluating it for the third time in a year) and Australia boosted taxes up to 40% on commodities producers, shake the equity markets but modest impact on commodities market
The dollar index, a performance track of basket majors, was range bound as euro and Pound moved quite unstable. Dollar index waded in range 81.633-82.093 to settle at 81.866, -0.17%. The 16-nations single currency, Euro weakened as the $146 billion rescue plan for Greece failed to calm investor concerns about sovereign debt across Europe
Among the economic data releases, the US real gross domestic product (GDP) grew at an annual rate of 3.2% in the first quarter of 2010, following an increase of 5.6% in the fourth quarter of 2009
OUTLOOK
Shanghai copper stockpiles increased last week to the highest level since at least 2003, indicating heavy stockpiling at the Chinese front. However this could be detrimental in future suggesting low usage at China, the world’s largest consumer and thus affect prices. Moreover, China banks setting aside more deposits as reserves, fuel concern the lending restrictions may damp demand for raw materials
The dollar index opened at 81.800, made an intraday high of 82.278, while up by 0.43% as all the counterparts wade low. The economic turmoil across globe is retreating the dollar‘s safe haven demand after the investment in other financial markets looks apprehensive The Asian equities trade low as the Wall Street ended low. Weakness in equity markets would carry a mirror effect in the commodities markets as well
Many of the international markets would remain closed for the day, per se Labor Day in China, early May bank Holiday in UK, Constitution Memorial Day in Japan
Consolidating the view we suggest MCX base metals to open on a flat customary note and trade sluggish for the day. Closure of international counterpart would instill little movement. Economic data releases from the US, including Personal income and spending, ISM manufacturing and construction spending could be of some help. Prices would trade on cues from the global equity markets as well as the rebounding dollar index. Overall we suggest prices to remain range bound for the day
