SHANGHAI, Nov. 21 (SMM) -- Poor results of government bond auctions by Spain and France last week triggered investor fears that the debt crisis would spread to core euro zone countries, leading to a broad sell-off in commodity markets, and SMM expects Shanghai metals prices to fluctuate in a narrow band in the short term.

The European debt crisis still depressed market sentiment, and non-US dollar currencies rebounded significantly after news that the European Central Bank will lend to the International Monetary Fund to bail out bigger euro zone economies, but the gains rolled back since markets were still worried about euro zone leaders’ ability to resolve the debt crisis. In addition, the US debt problem also came to a deadlock. The US bipartisan debt reduction commission failed to produce a spending reduction plan despite the approaching deadline (November 23rd), which may lead to a delay in the fiscal and structural reform and in turn ultimately drag down US economy. Furthermore, Chinese financial markets have not improved fundamentally, which also weighed down Shanghai metals prices.

Technically, prices for most metals traded on the Shanghai Futures Exchange (SHFE) fell below 10-day and 30-day moving averages, with SHFE three-month copper contract prices even falling below RMB 55,000/mt. SMM predicts Shanghai metals prices will fluctuate narrowly in the short term amid international debt crisis and bearish Chinese stock markets.