SHANGHAI, Jul. 5 (SMM) – Base metal market turned cautious after days’ of rallies. Market maintained narrow fluctuations on Wednesday, July 4 with trading light since US markets were closed for the Independent Day holiday.

Although most market players expect the European Central Bank (ECB) and Bank of England will further lower their interest rate to allow more monetary easing at the upcoming policy meeting, uncertainties are still affecting the market. The ECB will announce its resolution on interest rate at the meeting to be held at 19:45 Thursday (GTM+8), and market expectations are that the ECB will lower the interest rate by 25 basis points to 0.75%, reflecting its determination to stimulate economic growth. However, credit conditions in Spain, Greece and Italy remained dismal with their bond yields staying high. The 10-year bond yields for Spain and Italy were 6.2% and 5.7% respectively, while the yield in Germany was only 1.6%, making it the biggest issue in the Euro zone.

According to French revised 2012 budget‎ June 4, the country’s projected GDP growth for 2012 was revised down to 0.3% from 0.7% expected previously, with inflation rate expected at 1.9%. Meanwhile, service sector PMI for several European countries was reported mixed, with service sector PMI for Euro zone, France and Italy all revised up, but the PMI showed contraction in Germany and presented the slowest growth in eight months in the UK. In this context, market remained wary.

Under these situations, momentum behind the rally remains weak and base metals still need further correction. Market players may watch on the sidelines.