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Shanghai Metals Rebound with Improved Economic Environments
Nov 14,2011 13:17CST
smm insight
Shanghai metals rebound supported by improved economic environments in major economies.

SHANGHAI, Nov. 14 (SMM) – Investor worries towards the Euro zone debt crisis slightly eased last weekend, and with better-than-expected employment data from the US, the appeal of riskier assets increased. Meanwhile, a “fine-tuning” of Chinese monetary polices also provides support for the rebound of today’s base metals in Shanghai.

In Europe, Italian Prime Minister Berlusconi held a political alliance meeting last weekend to discuss possibilities for Mario Monti to take up his position. Greece nominated Lucas Papademos as Prime Minister of its transition government, which started to work last Friday. The new government plans to approve the latest 130 billion euro bailout plan of the European Union and implement relevant measures. The European Central Bank’s purchase of Italian debt helped press down Italian bond yield to below 7%. The market sentiment stabilized temporarily as a result. In stock markets, the Dow Jones Industrial Average Index closed at 12,153.68 points, up 1.4% from the previous week. A rebound was also seen in European stock markets after Italy approved its budget plan, with the STOXX Europe 600 index closing at 240.98 points.

Positive news during the weekend may boost the market sentiment in China. Expectations for policy improvements also appeared, such as dividend policies in the stock market and small-sum financing and exit systems in the Growth Enterprises Market. This will definitely help stabilize investor confidence, which will in turn help stabilize commodities prices. As the global economic outlook turns more obscure, a change in Chinese monetary policies is more likely to occur. Meanwhile, a slip in October’s Consumer Price Index and the continuously slipping Producer Price Index reflected a rapid ease of inflation pressure, which added to possibilities of easing monetary policies. Data from China’s central bank show that new RMB loans increased 586.8 billion in October, up RMB 17.5 billion from the previous year. This confirmed the ease in Chinese monetary policies. China’s credit supply during the year is also expected to expand. Domestic monetary policies are already shifting directions. A change in the direction of domestic monetary policies also means the end of hardest time of Shanghai metals, which will benefit stabilization and rebound of metals prices.

European debt crisis
monetary policy

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