Key Macroeconomic Indicators for Base Metal Prices (2016-3-21)

SHANGHAI, Mar. 21 (SMM) – Diverging trend is expected for base metals prices this week with combined effect from falling dollar, firm crude oil prices and manufacturing PMIs from each country.

Markets expect the flash manufacturing PMI in euro zone to be disappointing this week. Limited positive effect is expected from the looser monetary policies decided by the ECB in March given the fact that previous long-term loose policies contributed little in recovery of manufacturing industry in euro zone. Softness in euro zone also posted negative impact on UK, whose manufacturing PMI in February slipped to a new low of 50.8 since April 2013. This led to UK considering whether to exit from EU.

ZEW economic Sentiment for euro zone and Germany in February should still be negative as both have reported losses since Q1 2015.

US February durable goods orders will likely maintain modest growth, which however, will generate limited impact on US dollar. US Fed left Federal fund rate unchanged at its March meeting and indicated scaling back its rate hike this year, driving down dollar. Though base metals prices are so that much sensitive to US dollar index, unexpected large fall in the index will also boost base metals prices.

International crude oil prices already broke through USD 40/bbl thanks to weak dollar, expectation for oil production restriction and monthly report from the OPEC. But gains in oil prices before April 17 will unlikely be sustainable due to weak fundamentals.