SHANGHAI, Oct. 13 (SMM) - Base metal prices look set to be more volatile this week as Chinese investors return from the week-long holiday and digest economic developments.

 

China eased bank mortgage lending rules just before its National Day holiday in early October. The People's Bank of China said purchasers of second homes may now be treated as first-time buyers, providing that the mortgage debt from their first purchase has been paid off. Several large, state-owned banks were reported to have developed detailed rules for implementation following the week-long holiday. This loosening of home-buying restrictions is expected to boost short-term housing demand, particularly in first-tier cities and in developed downtown areas elsewhere. 

 

The move, however, should not be misinterpreted as a wholesale relaxation. Bank lending remains tightly controlled. Nevertheless, markets now expect rises in both the volume and price of sales in the housing market later this year or early next. 

 

Minutes from the September FOMC meeting indicate that the Fed had hoped to revise forward rate guidance, but could put no new guidance forward. Several members read current forward guidance as suggesting a longer period before a rate hike. 

 

Some Fed officials remain concerned that the statement “interest rate will remain low for a considerable time after the asset purchase program ends” might be misinterpreted as a signal of a fundamental shift in stance, which in turn might result in an unintended tightening of financial conditions. 

 

Most Fed officials preferred to clarify that forward guidance remains dependent on economic data, meaning that the schedule for interest rate rises is subject to employment and inflation figures. This is believed to have increased uncertainty in the US dollar index, and in turn raising volatility in base metal markets.