After trading lower in the initial hours, base metal prices recovered all there losses and ended with gains of anywhere between one to two percent. On MCX, open interest declined for most of the metals indicating short covering which supported prices to move higher. Chinese inflation came in at 5.5 percent which is at three year high’s. This prompted its central bank to raise banks reserve requirement ratio by 50 bps. US equity markets ended with gains of more than a percent after data indicated less than expected contraction in retail sales. Asian equity markets are however trading mixed as Chinese markets and other emerging markets trade lower on the back of monetary tightening concerns while Japanese markets is trading higher. Dollar index is trading modestly higher at 74.5 levels. In the morning session on LME, base metal prices are trading modestly lower. On the fundamental front, reports indicated that Chinese bonded warehouses stocks might have declined by half and thereby giving indication that demand is picking up. On the economic data front, empire manufacturing numbers from US is expected to come in higher along with growth in industrial production. Overall, base metals might open slightly on the lower side but expectation of largely positive economic data might support prices to recover and trade higher. Aluminium Aluminium prices ended higher with gains of more than a percent on both LME and MCX. Aluminium stocks witnessed draw-downs of 5,725 tonnes as against decline of 9,000 tonnes from London Metal Exchange thereby marking 14th consecutive draw-down. Open interest declined by nearly 7 percent along with increase in prices by 1.7 percent on MCX indicating short covering. Copper Copper was the top gainer among the base metal pack as it ended with gains of nearly 3 percent on LME and MCX. Copper stocks on London Metal Exchange declined by 2,075 tonnes as against draw-downs of 2,175 tonnes on the previous day. Cancelled warrant ratio of copper however has also declined along with decline in inventory indicating that withdrawals from previously earmarked for stocks. Lead Lead stocks on London Metal Exchange witnessed draw-downs of 100 tonnes as against decline of 375 tonnes on the previous day. Cancelled warrant ratio has declined substantially to less than 0.40 percent of total stocks indicating the inventory might witness build-up in the near term. Lead was only one of the few base metals which witnessed increase in open interest along with higher prices indicating build-up of long positions. Nickel Nickel stocks on London Metal Exchange witnessed draw-downs of 30 tonnes as against decline of 390 tonnes on the previous day. Cancelled warrant ratio. On LME has also declined along with decline in stocks indicating draw-downs from the stocks which were previously earmarked for delivery. Basis has been rising indicating that discount in the cash prices has been widening and thereby is indicating lower demand for the metal and thereby might limit the upside for the metal price. Zinc Zinc prices ended higher with gains of more than a percent along with decline in open interest by nearly 8 percent indicating short covering. On London metal Exchange zinc stocks witnessed draw-downs of 125 tonnes as against decline of 350 tonnes on the previous day. Despite the lower levels of cancelled warrant ratio, the stocks of zinc continue to witness draw-downs and thereby might be largely owing to expectation of lower production from Japan. Courtesy: Karvy Commtrade Ltd. Get Trading Tips that suits your profile and budget at tips.commodityonline.com

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