Key Macroeconomic Indicators for Base Metal Prices (2015-12-7)

SHANGHAI, Dec. 7 (SMM) – Market will eye China inflation data and US retail sales data for November this week. Besides, two important crude oil reports will also catch market attention.  

US LMCI for November is expected to be positive, but this will not give an immediate boost to the US dollar index. This is because US rate hike in December is already a high possibility. US non-farm payrolls were 211,000 in November, beating market forecasts, though below October’s level. The US dollar index will react cautiously to employment data. Monetary easing by the ECB not long ago missed forecasts, keeping deals in foreign exchange market cautious.  

Despite mild salary increase, US consumption is tepid. Anyway, hopes for US rate hike are dampening willingness to spend somehow. Expectations for US rate hike are starting to have an impact on US home sales. Investors should closely watch US November retail sales, and the University of Michigan’s preliminary consumer sentiment index.    

Recently released China industrial value-added and manufacturing PMI suggest no signs of a turnaround in China’s PPI. The Chinese government proposed to reform supply & demand structure in industries plagued by overcapacity, but it remains to be seen how much effect the reform will have. 

International crude oil prices swung wildly around USD 40/bbl. The OPEC and IEA will release two crude oil reports in the second half of the week. Storage space for crude oil is likely to be used in in Q1 2016 on severe oversupply. As expected, the OPEC did not reach a consensus on output cuts during last Friday’s meeting. Return of Iran to crude oil market and Indonesia’s join in the OPEC make output cuts all but an empty word. The OPEC values market share more than crude oil prices. Russia is unlikely to cut output due to its economic conditions. Sluggish crude oil prices bode ill for other commodity markets.