India Base Metals: Up on upbeat China data; COVID-19 risks cap gains
Tuesday, Mar 31
By Rituparna Ghosh
NEW DELHI – Futures contracts of base metals rose on both the Multi Commodity Exchange of India and the London Metal Exchange today due to better-than-expected economic data from China, analysts said.
Data released by China’s National Bureau of Statistics showed the manufacturing Purchasing Managers’ Index for March stood at 52.0 against a record low of 35.7 in February, much higher than analysts’ expectation of 45.0, reports said.
However, the prices were capped as, according to Marex Spectron Analytics, the survey only asked how businesses in the country performed compared to the previous month, which showed the deepest contraction since at least 2005. Components related to exports and imports, however, continued to contract in March.
Investors also remained sceptical over the prospects of the data point offsetting concerns of a global financial crisis as COVID-19 cases continue to surge in the US.
“Sentiment in the Chinese industry has brightened more quickly and to a greater extent than expected in March. The rise in the PMI is another sign that the Chinese economy is recovering, which suggests that demand there will also pick up again. It is doubtful whether Chinese demand will be sufficient to fully offset the collapse in other countries, however. What is more, it is likely to take some time yet before production in China returns to its starting level,” Commerzbank AG said in a note.
“Even if China is getting back on its feet fairly quickly, most other countries are still in the midst of the fight against coronavirus. Consequently, the demand for Chinese goods abroad is likely to remain subdued for the time being.”
Moreover, a broad-based strength in the US dollar also influenced metal prices as a stronger greenback makes the dollar-denominated base metals expensive for buyers holding other currencies.
At 1750 IST, on MCX, the March futures contract of:
–aluminium was at 135.2 rupees a kg, up 0.8%
–copper was at 376.4 rupees a kg, up 1.2%
–lead was at 133.5 rupees a kg, up 0.8%
–nickel was at 860.2 rupees a kg, up 0.1%
–zinc was at 145.8 rupees a kg, up 2.1%
Investors will also closely monitor the Caixin manufacturing PMI in China, scheduled to be released on Wednesday.
On the MCX, the March copper contract is seen at 350-380 rupees per kg. The same-month nickel contract is seen at 840-880 rupees per kg in the evening session and the zinc contract at 130-150 rupees per kg. The March aluminium contract is seen at 120-140 rupees per kg in the evening session, traders said. End
US$1 = 75.66 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Subham Mitra
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