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Tumbled US and European Stock Markets Weigh on Metal Prices
Sep 6,2011 11:38CST
smm insight
Source:SMM
If there is no remarkably positive macro news, base metal prices in Shanghai will continue to fluctuate weakly in the near term.

SHANGHAI, Sept. 6 (SMM) -- US and Canadian markets were closed on Monday for a holiday, while European stock markets tumbled due to fears of economic slowdown and debt crisis. As the largest economy in Europe, German stock markets plummeted by over 5%, since investors began to shift large amounts of speculative funds to safe-haven assets such as precious metals given concerns over European debt crisis and US economic outlook. As a result, international commodity prices face further downward pressures. 

Currently the euro zone is facing almost all-sided woes. On the Greece side, following a breakup of negotiation on budget deficit cut, the country may not be able to receive its new round of bailout loan, which will expose the country to severe risk of debt default. This default, if happened, may transform the debt crisis in the euro zone into an economic crisis. On the Germany side, after its prime minister’s party tasted a fifth electoral failure in 2011, investors are worrying that Germany may discount its support for debt-ridden euro zone countries. On the Italy side, as Moody’s, the credit agency, is scheduled to make a conclusion on review of Italian debt rating, investor nerves may stretch tight on the Moody’s decision. Falling of European bank stocks prices on successive depressing news even spread to the whole European stock market. On this side, Deutsche Bank shares lost 8.9%. The Royal Bank of Scotland, which was sued by US Federal Housing Finance Agency, reported 12.3% loss on its shares. For others, Barclays Bank lost 6.7%, HSBC down 3.8%, Societe Generale down 8.6%, BNP Paribas down 6.3% and Credit Agricole CIB down 5.5%.

In the domestic market, China continues the tightening monetary policy amid a slowing of economic recovery, and investor confidence remains fragile. Markets are still eyeing China’s CPI data, as well as latest macro policies. Tumbled overseas stock markets and crude oil prices will continue to weigh on SHFE base metal prices. China’s tighter credit policy creates no opportunity for metal prices to rebound significantly, and if there is no remarkably positive macro news, base metal prices in Shanghai will continue to fluctuate weakly in the near term.

 

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