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Last week, the sentiment on base metals was weak, owing to the announcement of disappointing growth numbers in the European Union and weaker-than-expected non-farm payroll numbers in the US.
Copper led the decline, falling 2.39 per cent to close at a seven-week low of $6852.5 a tonne on Friday, on the back of dismal outlook for an economic recovery in major consuming regions, including China, the US and the European Union. Zinc and lead fell 1.93 per cent and 1.9 per cent to $2,260 a tonne and $2,194.5 a tonne, respectively, while aluminium fell 1.86 per cent to $1,980 a tonne.
The ongoing geopolitical tensions in Ukraine and Iraq have resulted in the dollar index moving up, which has puts pressure on other asset classes, including base metals. As the demand for these metals moves in line with global economic growth, a weak economic sentiment threatens their consumption, resulting in a negative impact on their prices.
“Last week, a number of European countries posted poor growth numbers. Also, the US’ non-farm payroll data were weaker than expected. All these negativities indicate global manufacturing activities will remain subdued, resulting in lower consumption of base metals, which is reflected on prices,” said Gnanasekar Thiagarajan, director, Commtrendz Research.
US Federal Reserve Chairperson Janet Yellen is scheduled to announce a road map for an economic revival in the US on August 22. While Yellen has already announced gradual phase-out of $10-billion-a-month quantitative easing by December this year, that country’s economy has given mixed signals in the past few months. While non-farm payrolls beat Street expectations in June, rising to 288,000 from 217,000 in May, these fell to 209,000 in July. In July, the unemployment rate in the US increased marginally to 6.2 per cent from 6.10 per cent in June.
The gloomy numbers from Euro zone, which has a $13-trillion economy, accounting for 17 per cent of the world’s gross domestic product, were disappointing.
The Euro zone’s economy expanded just 0.7 per cent through the past year.
