The base metal complex fell sharply on the previous session as the dollar index recouped along with global equities tread waters.
The market fell on the view that global risk aversion may have been imbibed too fast after the European Central Bank move to protect the fall in euro-zone economies. The fall in crude oil prices also supplemented the fall in industrial metals
The Dollar Index, a six-currency gauge of the greenback’s strength, was up 0.50% intraday as the basket majors tread waters. Euro suffered a blow as investors anticipated that the relief package is not sufficient, along with structural problems to plague in Euro-zone
The lower industrial production in China suggests lower demand for base metals from the world’s biggest metals user. The Industrial production expanded 17.8% in past month from a year earlier, down from 18.1% in March and 18.5% expected
OUTLOOK
China's production of refined copper rose 6.1% in April on the month, while output of primary aluminium inched up 0.1% to rack up its second-highest monthly output on improved power supplies
Day ahead, the market expects a few important data releases from the US, Euro-zone and Germany. The Seasonally adjusted German GDP is suggesting no growth for Q1-2010 similar to 0% growth in Q4-2009. Euro-zone seasonally adjusted industrial production for March is suggesting growth to 1.00% from prior of 0.90%.
Moreover, the Euro-zone seasonally adjusted GDP is growing to 0.10% as compares to no growth in Q4-2009. Later in the evening, the US is due to release the trade balance and monthly budget statement figures. The trade balance in March is widening to $40 billion from the prior levels of $39.7 billion.
However, the Monthly budget statement for April month is reducing to $20 billion from prior of $20.9 billon. The data is mixed thus actual would help to govern the trade directions
The dollar index opened at 84.708, while touched an intraday high 84.815 as of now, wading high by 0.29%. Dollar index running higher above 84.50 levels as of now is a cause of concern as it depletes the demand for currency denominated commodities
Consolidating the view we suggest MCX base metals to open flat as the electronic session at LME does not provide any strong cues. The financial markets are very vulnerable to news from the Euro-zone and thus move accordingly. Rupee depreciation disturbs the parity with international counterparts. We expect metals to remain bearish for the day and thus recommend being on the sell side.
