AAP reported that Base metals have closed higher on the London Metal Exchange LME after strong gains throughout the afternoon and a busy news week that overall boosted both macro economic sentiment and metals prices.
Analysts however started to question how positive the week actually was and eyes turned once more to the US for direction as the macro economic environment continues to drive prices.
At the PM kerb close on Friday, LME three month copper was 3.5% higher on Thursday's close at USD 7,970 per tonne slightly down from the session high of USD 8,000 per tonne.
The red metal continues to post highs not seen since May although with some way to go before surpassing the April and May peak of USD 8,496.75 per tonne. The remainder of the complex also closed considerably higher on the day.
Analysts said that the US dollar was weaker once more against the euro in part after positive industrial data readings out of Germany. This dollar weakness continues to underpin base metal prices as it makes the greenback denominated complex more appealing to foreign currency holders.
Base metals continued to take considerable strength from news overnight that China will undertake sizeable investment into domestic infrastructure initiatives, such as large scale construction projects, in order to stimulate the economy. The news boosted Chinese equities and spurred short covering for base metals.
Mr Leon Westgate analyst at Standard Bank said that "The fact that the plans were sanctioned by central government rather than by regional governments has lent some additional weight. This spending is a similar size to the level seen in the 2008 to 2009 stimulus, however, this time it much more targeted and stretched out over a much longer timescale."
Even so it is debatable how much the plans will boost commodity demand and indeed domestic demand for finished goods in the short term. They do however look set to put a floor under industrial commodities for the time being, and may help to halt the destocking cycle, most obviously seen in the steel complex. The announcement may pre empt weak data readings.
Bond buying plans announced Thursday by the European Central Bank were also thought to be supportive of the base metal rally and wider sentiment. However, some analysts were wary of this too.
Mr Ed Meir of INTL FCStone said that "We could start to see questions arise about the ultimate impact of the proposal in the days ahead as investors begin to wonder whether the program is indeed bold enough. Having said that, none of this re examination is taking place right now, where we are once again sharply higher in most markets with copper leading the base metals group and now pushing past key resistance at USD 7,820."
Source - The Australian.com
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