SHANGHAI, Oct. 20 (SMM) -- Pessimism dominates global commodity market recently as Spain’s credit rating was cut, European debt crisis deteriorated and US economic outlook is still disappointing. In this context, Shanghai metal prices continued to fall.
The US Federal Reserve released its Beige Book earlier on Wednesday, saying US economy grew modestly in September, while its economic outlook will be even dimmer. According to the Beige Book, US economic activity continued to expand in September, but with the growth speed slower in some regions, so uncertainty over future business situation was reported. Meanwhile, German Chancellor reiterated the summit to be held on October 23rd will be a firm step, but not the last one. Anyhow, European crisis will not be resolved at a time. Finland’s President also said on Wednesday European leaders will unlikely reach an agreement on the European debt issue on Sunday. As a result, the market is not expecting a substantive result from the European summit.
Negative news weighed down financial markets. US stock markets closed down on October 19th. Dow Jones Industrial Average closed at 11,504.62 points, down 72.43 points or 0.63%, Standard and Poor's 500 Index ended at 1,209.88 points, down 15.50 points or 1.26%, and Nasdaq Composite Index settled at 2,604.04 points, down 53.39 points or 2.01%. LME base metal prices also fell rapidly overnight. LME three-month copper contract prices lost USD 262/mt to USD 7,180/mt, while LME three-month aluminum contract prices were down USD 29/mt to USD 2,181/mt. LME three-month lead contract prices fell by USD 81/mt to USD 1,862/mt, while LME three-month zinc contract prices declined by USD 48/mt to USD 1,831/mt.
The continuous expansion of domestic stock markets caused Shanghai and Shenzhen stock markets to decline rapidly, which dragged down metal markets. Meanwhile, China will likely continue the tightening monetary policy given current high inflation. In general, SMM predicts metal prices will continue to fall and market demand will remain weak as well amid increasing risks of a global economic slowdown and lingering European debt crisis.