SHANGHAI, May 21 (SMM) – Base metals extended gains from last Friday's session Monday, as market risk appetites grew somehow following G8 leaders' calling for Greece to stay in the euro zone after the weekend's meeting. Short-covering has currently helped base metals rebound, but future situation in Greece will continue to cap the rebound.
G8 leaders at the meeting held on May 19 said they supported Greece to stay in the euro zone. They also promised to take necessary measures to deal with financial turmoil and to help revive the global economy which is increasingly threatened by the European debt woes.
G8 leaders issued a joint statement at Camp David following the meeting, saying that "we commit to take all necessary steps to strengthen and reinvigorate our economies and combat financial stresses, recognizing that the right measures are not the same for each of us". To ease investor fears, G8 leaders added, "we affirm our interest in Greece remaining in the euro zone while respecting its commitments". Nevertheless, these leaders failed to provide detailed plans to help Greece out of its deteriorating debt crisis. But core euro zone countries said they would spare no efforts in helping Greece stay in the euro zone. A German Finance Department spokesman said last Friday that the German government was making all possible preparations, but she stressed that the bailout deal was still valid. The new French President Hollande also said that the euro zone should find a solution to the Greek debt crisis and must make every effort to keep Greece in the euro zone. As worries over Greek economic and political situation alleviated, speculative demand rose again.
Furthermore, Premier Wen Jiabao recently pointed out that the overall Chinese economy is currently stable and economic growth is within the expected target, but economic and social development is facing a more complicated domestic and foreign environment. China should stick to the overall tone of seeking progress while ensuring stability, properly handle the relationship between maintaining growth, adjusting economic structures and managing inflationary expectations, and continue to implement a proactive fiscal policy and a prudent monetary policy while giving more priority to maintaining growth. China will strengthen and improve macro controls according to new problems and issues that occur in economic operation, carry out timely and appropriate anticipatory adjustments and fine-tuning, boost domestic consumption, and stabilize external demand to promote steady and relatively fast economic growth. Markets expect the Chinese government will introduce more monetary measures to stimulate the economy, which is also positive for the current base metals trend.
These positive factors and short-covering helped base metals stop falling and begin to rebound Monday. However, SMM is still not optimistic about base metals prices over the middle term, eying continuously on situation in Greece and Spain and consumption in China.