After trading higher for most part of the day, base metal prices ended lower with losses of anywhere between one to four percent as dollar index rebounded. Investors also took profit off the table as they preferred to move on to sidelines ahead of the crucial unemployment data release from US. Volumes were higher by nearly 50 percent from the previous day.
US equity markets closed flat. Chinese markets opened today after a week long holiday and are trading higher with gains of close to three percent. Other Asian equity markets are also trading modestly lower. In the morning session on LME, base metals are trading higher with gains of close to half a percent.
Dollar index is trading modestly lower. On the economic data front, current account surplus of Germany is expected to decline and thereby might have some pressure on Euro. The crucial data to watch will be the non-farm payrolls data from US.
The expectation is that there will be job cuts and thereby will push the unemployment rate up by 1 bps to 9.7 percent. Job market in US continues to remain weak despite more than a year into recovery.
Overall, we at KCTL, expect base metal prices to open on the higher side given the support from positive Chinese market and modestly lower dollar index. However the gains might not be sustainable as investors might use the pull back to book profits in anticipation of negative economic data.
ALUMINIUM
Aluminium prices ended in red, though it was trading higher for most part of the day as profit booking was witnessed at higher levels
Aluminum outperformed the entire base metal pack as inventories consistently continue to decline. The cancelled warrant ratio also continues to remain stable
LME inventory declined by 675 tonnes as against increase of 25tonnes on the previous day
The cancelled warrant ratio has increased after many days of decline. This is indicating that new warrants have been issue for taking delivery
The basis on LME declined indicating from $18/tonne to $13/tonne indicating downward bias for prices in the near term
LEAD
Lead was the top loser and ended lower with losses of nearly five percent on LME
LME inventory for lead declined by 150 tonnes as against increase of 1,675 tonnes witnessed on the previous day
Lead was the only base metal which along with price fall witnessed increase in open interest indicating build-up of short positions
NICKEL
Nickel inventory on LME declined by a modest 138 tonnes same as witnessed on the previous day
After being in backwardation for few days, the market has come back into contango with premium now at $36/ tonne. This might lead to outperformance of nickel among the base metal pack
The calendar spread on MCX however continues to remain stable
ZINC
LME inventory for zinc witnessed decline of 825 tonnes as against decline of 675 tonnes witnessed on the previous day
The cancelled warrant ratio continues to decline, though at a slower pace indicating that though stocks are continuing to decline, no fresh warrants are being issued for taking delivery
The open interest fell along with price rise indicating profit booking at higher levels
