Tuesday morning base metals are trading up by 0.2 to 0.7 percent at LME electronic platform after a slightly better PMI release from China coupled with short covering. However, the Asian equities have retreated due to weak economic developments.
The Chinese private PMI was slightly below the 50 mark and provided slight optimism among market participants. Further, Chinese June refined Copper imports declined 17.2 percent while Peruís Copper production increased by 8 percent on a monthly basis due to increased production and may continue to support downside in todayís session. Today the Troika (IMF, EU and ECB) would meet with the Greek counterparts to review the 130 billion bailout and markets may eye the same. Though, the outcome of the meet may further weaken metals pack, however better economic releases and increased short covering may restrict much downside.
From the economic data front, the Euro-zone and German PMI numbers may improve slightly after bottoming out in May while the US home price may gain along with improved Richmond manufacturing may support pullback among base metals. However, weak downstream demand coupled with increased Euro-zone bailout concerns might continue to keep metals pack at tenterhook. Therefore, base metals might open on a stronger note due to positive LME prices and initiating shorts might be recommended.
However, better PMI releases from the Euro-zone and increased short coverings might provide slight pullback, overall riskier assets including metals might remain at tenterhook and we recommend initiating short positions.
Improved PMI took a bit of pressure off the markets, but still is not strong enough to push markets upwards. A reading below 50 does not support growth and today’s report even though better than expected was not above the important and significant 50 level.
Gold and silver are continuing to waiver in this morning’s trading as markets are not responding positively. Commodity currencies have not been supported by the better than expected report.
The AUD and NZD are down in early morning trading, while the JPY remains strong on risk aversion.
Continued worries over Greece and the outcome of today’s meeting, and the suspicion that funds will be cut off, weight on the markets.
New from Spain that more bailout money will be needed continues to worry traders and the last straw was Moody’s possible downgrade of Germany’s debt rating.
This move will keep Germany on her toes and we will not see much flexibility into German policies and they have effectively drawn a line in the sand saying Greece must meeting its obligations to institute austerity measures before any additional funding will be released.
Metals just don’t seem to have much chance in today’s market.