SHANGHAI, Oct. 12 (SMM) – Though demand and supply for metals have not changed much, the global economic outlook seems still far from optimistic. Investor worries towards the European debt crisis reignited after Fitch Ratings downgraded Italy and Spain. European Central Bank Present Trichet’s pessimistic remarks also added to investor worries, ending the temporary rebound in Shanghai metals following previous holiday.
Slovakia vetoed the EFSF expansion overnight, disappointing investors expecting a solution for the euro zone debt crisis. This, combined with Trichet’s warning that the euro zone debt crisis is facing all round contagion dragged the market sentiment to the bearish side again. Meanwhile, the US Senate approved a bill requiring US government to add import tax on its trade partners whose currencies are “undervalued”, so as to force quicker appreciations of these currencies, including China’s Yuan. This will inevitably affect export demand of Chinese products.
Central Huijin Investment Ltd., a unit of China’s sovereign wealth fund recently increased its shareholdings in four large Chinese banks thorough stock buying, which failed to lift up investor confidence for the stock market, as responded by the Shanghai Composite Index’s dropping to a 31-month low today. SMM do not expect Shanghai metals to continue their rally within present macro environment. We expect these metals to fluctuate downward in the short term.