Base Metals to Extend Rebounds on Positive Figures

SHANGHAI, Mar. 12 (SMM) –Economic figures from major economies were mostly better than expected last Friday. Markets predict China will probably further loosen monetary policies as inflation falls, and results from Greek debt swap deal and the US nonfarm payrolls report are also positive. As such, base metals are likely to gain support in the near future.

The US Labor Department announced March 9 evening that the nonfarm payrolls added 227,000 in February, well above the expected 210,000, while the jobless rate remained unchanged at 8.3%, in line with market anticipations. The strong February nonfarm payrolls data is again beneficial to the US economy, further cooling market speculations that the Federal Reserve (Fed) will introduce the third round of quantitative easing measures and also raising the likelihood the Fed is very likely to raise the benchmark interest rate. In this context, the US dollar can rebound strongly over the near term, which will have a limited impact on base metals, however, as markets eye more on the upbeat job market that can probably lift consumption. The Greek government announced March 9 that the participation rate of debt swap deal reached 85.8%, and will be able to reach 95.7% after starting Collective Action Clauses (CAC). This means Greece has averted an immediate risk of messy default, clearing the way for the final secure of EUR 130 billion bailout package. Market worries over the Greek debt woe therefore alleviated.

China will mainly stabilize its economic policies in 2012, as Wen Jiabao lowered the growth target below 8% when delivering a government work, the first time in the past eight years, suggesting the government's resolution to transform its economic pattern. China also announced on March 9 that the CPI growth fell to a 20-month low of 3.2% in February, increasing comments that China will relax monetary policies. China's latest Manufacturing Purchasing Mangers' Index (PMI), which was released earlier, rose for a third straight month, and stabilized at the 50 mark. Global economic data continues to improve, providing momentum for financial markets to recover. The US dollar, commodity markets, and stock markets even surged simultaneously. Despite inconsistent economic recovery pace, economic recovery is predicable given strong marker confidence. Hence, global commodity prices will move higher gradually in the future. From the recently improved Chinese stock markets, risky assets are greatly sought, which will help base metals rebound for the near future.