SHANGHAI, Jul. 25 (SMM) – Metals prices stayed soft as demand is still pressed as indicated by reports of manufacturing contracts in China, Euro Zone as well as the US.
The HSBC China flash manufacturing purchasing managers' index for July came out at 49.5, representing a sharp upturn from 48.2 in June and hitting a 5-month high. The manufacturing output index reached 51.2, a 9-month high. On detailed aspects, while the July manufacturing output and procurement volumes showed expansion, new orders continued to shrink, and employment and backlogs of work were still weak. The PMI itself has also stayed below 50, which divides contraction and expansion, for a ninth successive month. This added to market fears about China's slowing economic growth and a hard landing. This shows that China's economic downturn has not yet bottomed out and there is still downward pressure.
In Europe and the U.S., according to data published July 24, United States July manufacturing purchasing managers' index fell short of expectations, to its lowest level since December 2010. Data show that United States Markit manufacturing purchasing managers' index’s initial value was 51.8 in July, a 1.5-year low, while the expected figure is 52.0. July new orders fell for two successive months for the first time in three years, and output growth remained weak, showing slow recovery of the US economy. July eurozone manufacturing purchasing managers' index fell from 45.1 of June to a lower than expected 44.1, also the lowest in three years. This reflects eurozone private business activities shrank for the sixth successive months, increasing the likelihood of recession in the eurozone. Initial value of eurozone’s composite purchasing managers' index was 46.4 in July, flat with June, but still showed contraction.
Moody’s lowered Tuesday the European Financial Stability Fund’s outlook to negative after downgrading outlooks of Germany, Holland and Luxemburg, three AAA-rated EFSF guarantors one day earlier. Germany now provides 29% of EFSF guarantor capital. As the European debt crisis continues to worsen, all eurozone nations will experience its impact. The European debt crisis seems is immune to any good news for the near term.
The haven asset dollar has been continually strengthening recent days, with the US dollar index hitting a 3-year high and breaking through the 84 mark. Shanghai metals prices therefore should stay on the downward track in the near term.