Metals in Narrow Ranges on EU Summit Uncertainty

SHANGHAI, Jun. 29 (SMM) -- Base metals prices settled lower on Thursday, as pessimism on the EU Summit’s ability to curb the region’s debt crisis and disappointing economic data from the US damp investor confidence.

Data from the US Labor Department show new unemployment claims dropped 6,000 to 386,000 for the week ending June 23, but were higher than the expected 385,000, indicating softness in the employment sector and a dim economic outlook. The Fed’s recent extension of “Operation Twist”, however, means quantitative easing will be something far from reach for the near term. That has effectively heated risk aversion, inducing losses in US equity markets. The Dow Jones Industrial Average lost 24.75 points to 12,602.26, the Standard & Poor’s 500 Index fell 2.81 points to 1,329.04 and the NASDAQ Composite dropped 25.83 points to 2,849.49.

The EU Summit starting on Thursday signaled possibility to use EFSF and ESM to buy Spanish and Italian government debts in the primary markets, which German Chancellor Angela Merkel so far has not shown any opposition, adding to support from an earlier EUR 120 billion growth package. Nevertheless, Italian debt yields surged to their highest since last December during the day, reflecting staying strong, if not increasing, worries towards the European debt crisis.

The soft euro zone economy has been weighing on major risk currencies, with the US dollar index, which tracks performance of the dollar against a basket of currencies, strengthening 0.38% to 82.768. Base metals should continue to weaken if European leaders fail to take any effective measures to contain the region’s debt crisis.