SHANGHAI, Dec. 21 (SMM) - SHFE base metal prices fluctuated sharply on December 20th. Both Shanghai Stock Exchange composite index and Shenzhen Stock Exchange component index tumbled, with Shanghai Stock Exchange composite index down as much as 3%. As a result, SHFE base metals were dragged down. Market confidence was depressed despite of prices rallies at the end of trading.
Asia-Pacific Equities Fall across the Board
On Monday, Tokyo equities ended with the biggest single day decline. The Japan’s Nikei index fell by 87.42 points to 10,216.41 points, or a decline of 0.85%, the biggest loss since November 30th. Australian equities also set the biggest single day decline for the past two weeks. With the slumping Asian stocks, S&P/ASX 200, the Australian benchmark, fell by 26.5 points, or a decline of 0.6%, finally closing at the six-day low of 4,736.6 points. Hong Kong stocks closed lower as well, with the Hang Seng Index slumping by 75.77 points to 22,639.08 points, or a decline of 0.33%. Singapore stocks also fell, with its benchmark Straits Times Index falling by 20.05 points to 3,132.96 points, or a decline of 0.6%. Market concerns eased to some extent after North Korea announced not to react to South Korea’s military provocations on December 20th. In response, major equities moved out from yesterday’s downturn, and Asia-Pacific equities opened slightly higher today, indicating limited impact from the Korean tensions.
Tensions Ease Between North and South Korea
North Korea and South Korea tended to compromise when apparently a war seems to near. South Korea postponed military exercises on the excuse of weather, and exercising time was also shorter than expected, while North Korea allowed nuclear inspections. Such moves imply that both parties are avoiding further conflict.
Base Metal Prices to Keep Rising
With intensified intensions on the Korean Peninsula, Nymex gold settlement prices closed higher, with prices up USD 6.90 for February delivery to USD 1,386.10 per ounce, a gain of 0.5%. The intensified tensions between North and South Korea strongly supported gold prices. With market concerns over the conflict on the Korean Peninsula, SHFE base metal prices exhibited volatile movements on December 20th, but finished up at the end of trading. However, trading volumes dropped along with profit-taking at the year-end. LME three-month copper contract prices ended up USD 70/mt to end at USD 9,200/mt; LME three-month aluminum contract prices finished up USD 30/mt to close at USD 2,378/mt; LME three-month zinc prices closed USD 9.5/mt lower to end at USD 2,290/mt. With a stronger US dollar and expectations of inflation pressure, LME copper prices are approaching the record high level, and other base metal prices are generally on the upward track as well. SMM believes that base metal prices will continue to rise, as the existing regional political factors will not change its upward track in a fundamental way.
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