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US Non-Farm Employment Data Expected to Weigh on Base Metals Market 

SMM Morning Review - 2010/2/4 Nickel Market

SHANGHAI, Feb. 4 (SMM)&nbsp;-- 
Eurozone Debt Crisis Keeps Coming 
In recent days, base metals markets moved with stock market performance, with prices rebounding after rapid declines in late January. Dow Jones index gained more than 100 points for two consecutive days, and China A-shares market on February 3rd closed 69.13 points higher. In addition, Australia's central bank unexpectedly decided not to raise its interest rate, and this may be result of making further evaluation for its economic recovery after one more month's observation, and the country will not stop its move to lift interest rate. On February 3rd after European Union made a preliminary rescue package for Greece's debt crisis, the Portugal government raised its estimate for this year's budget deficit to 9.8 from 8.1% of GDP, triggering further concerns towards financial stability in the Europe.
Base Metals Markets to Face Pressure from New US Non-farm Employment Data 
Recently, both real estate and PMI data in the US improved, and market players paid more attention to the non-farm employment in the US which will be released this Friday with the absence of additional news. The US ADP Employer Services announced on February 3rd that the employment in private departments in the US only decreased by 22,000 during January, the smallest decline since February 2008, while the employment in service sector increased further; previously, economists predicted the employment in private departments would drop by 30,000, indicating the US labor market has improved in January. The employment in private departments in the US declined by 61,000 on a monthly basis during December 2009, but dropped by 84,000 before revision. The US Department of Labor will release non-farm employment data on February 5th. Economists predict the non-farm employment in January will be flat at December levels, and the non-farm employment in December 2009 declined by 85,000. Meanwhile, the US unemployment rate will also be released, and market players predict the unemployment rate will remain at 10%.&nbsp;
Employment data from ADP show that US economy is experiencing strong recovery, and economy situation in the US is far better than that of Japan which is suffered from deflation and than that of some European countries with debt crisis. Although the US non-farm employment data are lower than expectation in December 2009, non-farm employment data are still gradually improving. In this context, the view that US economy is recovering should be supported as long as decline rate of non-farm employment data is lower than previous level, regardless whether the data are higher or lower than expectation. If the non-farm employment data are better than expectation, recent strong US dollar will continue to move upward, and if the data are worse than expectation, US dollar may face pressure to fall. However, the upward trend of US dollar will hard to be reversed in the medium term, which will further weigh on base metal prices. Recent rebound of base metal prices will come to an end as a result. Major metal prices will continue to decline in the short term.
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To contact the writer on this report: <a href="mailto:seasonwei@smm.cn">seasonwei@smm.cn</a>
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