SHANGHAI, Jun. 27 (SMM) -- Base metals prices have seen successive days of losses recently, as German Chancellor’s strong position damps hopes on new measures to solve the European debt crisis and growth of the global economy has been weak.
Surging Spanish and Italian debt yields mean investor confidence has weakened further. Discrepancy within the euro zone and arguments between euro zone and other regions on financial transaction taxes etc. mean the coming EU Summit will disappoint. Germany Chancellor Merkel already expressed concerns over too much focus on debt sharing, reflecting disagreement between Germany and other euro zone nations and raising doubts on the EU Summit’s ability to solve the European debt crisis.
Cyprus officially applied for EU aid on June 25, following aid calls of four other euro zone nations, quoting the need to fend its financial sector from Greek debt exposure. The amount Cyprus needs has recently been estimated at as much as EUR 10 billion, and not lower than EUR 6 billion, while the size of the Cyprus economy is only around EUR 17.3 billion. Investors now worry the debt crisis may spread to more euro zone nations, after Spain’s debt woes worsened. Spain sold as much as EUR 3.08 billion (USD 3.8 billion) of short-term bonds on June 26, despite higher borrowing costs. Moody’s already downgraded 28 Spanish banks, noting that financial weakness of the Spanish government means Spanish banks are less likely to receive any support from the government.
Investors now hold little hope on the EU Summit for solving the region’s debt crisis, but worry that worsening of the crisis will push up the US dollar and weigh down metals prices. Sluggish consumption will also add to the appeal of haven assets, so base metals should remain weak in the near-term.