SHANGHAI, Jun. 6 (SMM) – Base metals rebounded moderately on Tuesday and Wednesday. Despite the remaining risk aversion caused by the unresolved European debt issue, the modest rise of ISM service index in May has lifted market sentiment unexpectedly.
Finance ministers and central bankers from the G7 nations held a teleconference Tuesday, and Japan's finance minister Jun Azumi says G7 leaders agreed to work together on Greece and Spain. The possibility of Greece leaving the eurozone was not discussed at the conference. The policy meeting of the European Central Bank will be held on Wednesday. With the European debt crisis spreading, Spain’s Treasury Minister Cristobal Montoro said the country is losing its access to credit markets given the current bond yields.
The Institute for Supply Management (ISM) said on Tuesday its May services index edged up to 53.7 from 53.5 in April; economists had expected the index to hold steady at April's level. ISM service index has been above 50 for 29 months, indicating continuous expansion in the sector. The data offered a positive note for financial markets following a string of unfavorable news. The US equities stabilized June 5, with the Dow Jones Industrial Average Index up 26.49 points, or 0.22% to 12127.95 points. Nasdaq Composite Index gained 18.10 points to 2778.11 points, a growth of 0.66%, while Standard & Poor's 500 index ended at 1285.50 points, up 7.32 points or 0.57%.
Market is still focused on actions of central banks. Australian central bank cut its interest rate by 25 basic points to 3.50% June 5, implying further relax to market liquidity by central banks of developed countries, and metals may benefit from this in the long term. Fed chief Bernanke will give a testimony concerning to the economic prospects and monetary policy before Congress on Thursday. Market players also await the ECB’s monthly rate setting meeting later on Wednesday and the policy meeting held by the policy maker of British central bank to be end on Thursday. Despite the recent fluctuations in metal markets, investors started buying some metals falling sharply, such as copper, with the hope that central banks and governments will move to spur recovery. However, risk aversion may still prevail in the market before any substantial results achieved for the European debt issue, meaning the weak trend of base metal will not be arrested in the near term.