On Friday, base metal prices largely ended higher with gains of anywhere between half to one percent on the back of supportive economic data. Equity markets also ended largely on the higher side. Chinese economy grew 9.7 percent in the first quarter of 2011 as against expectation of 9.2 percent. This was however accompanied by higher inflation. CPI came in at 5.4 percent as against 4.8 percent in the prior month. Higher inflation prompted Chinese central bank to hike reserve ratio by 50 bps over the weekend. This marks fourth hike this year. US equity markets continue to move higher and ended with gains of half a percent. Most of the Asian equity markets are also trading higher with average gains of close to half a percent. Chinese central bank reserve ratio rate hike was largely anticipated as inflation continues to surprise on the higher side. Dollar index is trading marginally higher. In the morning session on LME, base metal prices are trading higher with average gains of half a percent might be tracking largely positive equity markets. On the economic data front, consumer confidence data from Euro zone is expected to come in lower while the NAHB housing market index is expected to remain unchanged at 17. Overall, given the equity markets are largely on the higher side and reserve ratio hike from China is out of the way, base metal prices might remain on the higher side. Aluminium Aluminium prices ended higher with gains of nearly two percent on LME thereby outperforming the entire base metal pack. Aluminium stocks on London Metal Exchange witnessed draw-down of 2,750 tonnes thereby marking eighth consecutive decline. On a weekly basis also stocks witnessed draw-down of 15,400 tonnes from London Metal Exchange thereby taking the total stocks to 4.56 million tonnes. Copper Copper prices ended flat on LME while on MCX prices ended lower by almost a percent with stronger rupee accounting for some of the losses. Copper stocks on London Metal Exchange witnessed draw-downs of 375 tonnes as against build-up of 875 tonnes on the previous day. Cancelled warrant ratio have been increasing indicating that stocks might continue to witness draw-down in the near term. Lead Lead stocks on London Metal Exchange witnessed huge build-up of 3,225 tonnes thereby marking third consecutive day of net additions. Cancelled warrant ratio on LME has also been declining indicating and stands at near 1 percent indicating that stocks might continue to witness build-up in the near term. Open interest also declined along with increase in price indicating short covering Nickel Nickel stocks on London Metal Exchange witnessed draw-downs of 702 tonnes as against decline of 876 tonnes on the previous day. On a weekly basis also stocks witnessed net draw-down of 744 tonnes from London Metal Exchange warehouses. The basis has declined back to zero i.e., both spot and forwards are trading at same price indicating demand for the metal in the physical market which has lead to trimming of discount. Zinc After witnessing huge build-up of 26,675 tonnes on the previous day, zinc stocks witnessed a modest build-up of 525 tonnes. Cancelled warrant ratio is however providing some respite as it has moved higher to 1.1 percent of the total stock as against 0.6 percent. Open interest rose by more than 20 percent along with decline in price by a percent indicating build-up of short positions.

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