Shanghai Metal Prices Continue to Fluctuate on Many Factors

SHANGHAI, Nov. 7 (SMM) –Base metal prices ended with slight gains amid mixed news in the international market last week. The European debt issue further deteriorated, enlarging risks of implementation of the Greek bailout plan. However, considering slow recovery of the US employment market and higher possibility that the US Federal Reserve (Fed) will release more measures to boost the US economy, SMM expects that base metal prices may swing widely in the near future.

According to US economic reports, the US non-farm payrolls only added 80,000 in October, below the market expected 95,000, but the unemployment rate fell slightly. During September's interest rate discussion meeting, the Fed's move of "Operation Twist" was highly expected to be used to boost the US economy. However, from current situation, the "Operation Twist" failed to have a significant impact on the US economy, especially on the US job market. Most economists expect that the Fed will take more measures to boost the slowing US economy and ease the severe US employment situation. The European Central Bank (ECB) unexpected cut the benchmark interest rate by 25 basis points last Thursday, which means investors holding cash will get less yields. The ECB said low interest rate level and risk aversion demand would continue to provide support for market fundamentals over the long run since Greece faced an uneven road ahead over its debt problems. Greek Prime Minister George Papandreou survived a confidence vote on November 4th local time, but some parties out of power opposed his proposal of building a national unity government, so there is still a long way to go for Greek to finally implement the bailout plan. Markets initially responded strongly to the news of ECB's cut in the benchmark interest rate, and base metal market gained the most from that.  

The People's Bank of China (PBOC) injected RMB 96 billion liquidity through open market last week, a signal of fine-tuning monetary policy and an indication of eased market liquidity for the remainder of 2011. However, outcome of the European finance ministers' meeting scheduled on Monday and Tuesday is unpredictable. Hence, SMM expects that Shanghai metal market will swing widely under combined impacts of many factors for the foreseeable future.