SHANGHAI, Aug. 4 (SMM) – Shanghai Metals Market expects base metals to follow divergent trends this week, but optimistic expectations surrounding upcoming economic releases should favor some prices trending up.
Analysis of Major Macro-economic News in China and US
China’s State Council issued guidance on reform of the household registration (“hukou”) system July 30. The proffered guidance indicates that household registration restrictions will be abolished in towns and smaller cities first. The government also indicated that it would loosen residence registration requirements in mid-sized cities “in an orderly manner”, while a points system will be established to control the number of migrants moving to cities with populations over 5 million.
Reform of the household registration system is expected to boost infrastructure construction, as well as consumption of medical care, education, cars, home appliances, and housing in general. That, plus increased investment opportunities, should bolster demand for metals. Analysts estimate reform of the household registration system to contribute 5% to GDP growth over the next six years.
The US Federal Reserve agreed to cut bond purchases another USD 10 billion/month after its two-day policy meeting for July, but offered no clearer indication as to when it might raise rates. Although the Fed acted calmly after US Q2 growth proved brighter than expected, it did express greater optimism over the labor market and inflation. This upbeat assessment may help bolster the market.