SMM Nickel Price Forecast (Jul. 16-20)

SHANGHAI, Jul. 16 (SMM) –

Positive Factors

1. China's 2Q GDP growth was 7.6%, in line with market expectations, but the lowest growth in almost three years. Industry value added rose 9.5% in June, slightly below the 9.7% expected. Fixed assets investment rose 20.4%, higher than the 19.9% forecasted, and retail sales were also up 14.4% and exceeded the expected 13.5%. In general, China's 2Q GDP was still received slightly favorably by markets.
2. The number of US jobless claims fell to 350,000, the lowest level since March 2008. Although officials of the US Labor Department said the data may be adjusted, US unemployment has been steadily falling. 
3. The annual growth rate for China's M2 supply was 13.6%, while new loans rebounded to RMB 919.8 billion, a result of easing monetary policies by China's central bank.

Negative Factors:
1. Moody's downgraded Italy's debt rating from A3 to BAA2, and maintained its negative  outlook for the country since Italy's financing interest rates will likely rise further and since its economic outlook is deteriorating.
2. IMF representatives contacted the new Greek government last Thursday to obtain missing economic data. Greece will likely decline a second round of bailout funds since many citizens are opposed to tax increases and any decrease in social welfare benefits. 
3. With the exception of the European central bank, the People's Bank of China, the Bank of England, and the central banks of South Korea and Brazil all lowered interest rates last week. The interest rate cut by the Bank of South Korea is a sign that Asian economy faces a possible recession. The cut in rates by the Bank of Brazil also reflects the slowing growth in many developing countries.

In general, the global economy will not rebound in the short term and the European debt crisis is more severe than previously thought, but the likelihood of QE3 implementation is fading. Cuts in interest rates and easing monetary policies in major economies have injected liquidity into markets, helping boost sentiment. In this context, LME nickel prices are not expected to fall sharply in the coming week.