Shanghai Metal Prices to Stabilize on Monetary Policy Commitment by Major Economies

SHANGHAI, Sept. 16 (SMM) -- LME base metal prices rebounded overnight supported by steady rises in European and US stock markets and expectations that the Euro zone debt crisis will not deteriorate further. Shanghai metal prices also stabilized recently, and there is a low possibility metal prices will fall further. SMM believes metal prices will likely continue to fluctuate narrowly in the near term.

The European Central Bank (ECB) announced on September 15th that it would liaise with US Federal Reserve (Fed), the Bank of England (BOE), Bank of Japan (BOJ) and Swiss National Bank (SNB) to provide dollar liquidity into Europe's banking system, with a maturity of approximately three months. The ECB's move will adopt the mode of full allocation of a fixed interest rate on October 12th, November 9th and December 7 th, and means the EBC could get valuable liquidity when necessary. After the announcement of this news, the US dollar index slid 0.59% to 76.42, touching a four-day low, which lifted the euro. International financial markets Thursday also advanced on the news. In particular, US equity markets closed higher for four consecutive days in the past 15 trading days, with the Dow Jones Industrial Average closing at 11,433.18 points, up 186.45 points or 1.66%, the Standard & Poor's 500 Index closing at 1,209.11 points, up 20.43 points or 1.72%, and the Nasdaq Composite Index closing at 2607.07 points, up 34.52 or 1.34%.  

Global major central banks said they would provide European banks US dollar loans, mitigating the need to buy gold as risk aversion assets. Gold futures on the NYMEX closed with sharp declines on September 15. The most actively traded NYMEX gold contract prices for December delivery closed at USD 1,781.40/oz, down 2.5%, and the lowest level of settlement prices since August 25. NYMEX low sulfur crude oil contract prices for October delivery were up 49 cents per barrel to close at USD 89.40/bbl, up 0.5%. BRENT crude oil prices were up USD 2.94/bbl to close at USD 115.34/bbl, up 2.6%.

Strengthening stock markets and LME metals prices helped a slight rebound in Shanghai base metals. However, except for copper, transaction volumes for aluminum, lead, zinc remained quite limited as market players were closely watching progress in the euro zone and monetary policies in major countries. SMM expects limited upward space for base metals before the FOMC meeting on September 22nd, and base metals are expected to extend weak momentum in the short term.