Base metals on the London Metal Exchange (LME) closed mostly lower following downbeat news from top industrial metal consumer China, with opinions differing on the near-term outlook for the complex.
At the close of open-outcry trading on Friday, LME three-month copper closed 0.8 per cent lower on the previous settlement at $US8,045 a metric ton.
The metals rose in the previous session, on account of a surging euro, which traded above the $US1.33 level against the US dollar Friday. This lifts the appeal of the US dollar-denominated complex to buyers bearing the single currency.
But, despite an overnight stimulus announcement from Japan, downbeat news out of China pressured Asian equities and the base group early in the European day Friday, analysts said.
China's consumer-price index rose 2.5 per cent from a year earlier in December, faster than November's two per cent rise. Economists had expected a reading of 2.4 per cent.
"This has dented market confidence as far as policy easing is concerned - coupled with a decline in producer prices which indicates persistently weak industrial demand, it is no wonder the markets are feeling downbeat," said Standard Bank analyst Marc Ground on Friday.
Rising prices could limit Beijing's flexibility to support the Chinese economy, analysts said, should leaders worry that pumping more cash into the financial system would accelerate inflation.
Elsewhere "potentially poor [retrospective] data out of Germany is not helping things either and seems to have at least arrested the euro's advance," said INTL FCStone analyst Ed Meir.
The German economy appears to have slumped in the last quarter of 2012, but seems set to pick up again in 2013, according to a monthly report released by the German Economics Ministry Friday.
"Despite the currently mixed tone, we suspect that a slightly upward bias in base metals should keep over the balance of January," said Meir.
"We say this in view of the fact that the upcoming fiscal cliff negotiations (part II) have yet to get underway, thus allowing investors to focus more on an improving macro backdrop as opposed to the inevitable bickering that will most certainly erupt all over Washington in a few weeks' time," he added, noting a weaker US dollar against the euro in the meantime should also aid in the advance. INTL FCStone believes the euro has a shot of hitting $US1.35 by next month.
Others remained more wary.
"Markets have been rattled by the stronger-than-expected pickup in Chinese consumer inflation," said Ground.
"We feel that uncertainty over growth prospects and possible policy responses in China will remain a drag on the complex for most of the first quarter [and] we expect the bias to remain to the downside, with any rallies to be viewed as selling opportunities," he added.
Prices in dollar a metric ton. 3 Months Metal Bid-Ask Change from Thursday PM kerb
Copper 8045.0-8045.5 Dn 66 Lead 2305.0-2307.0 Dn 28 Zinc 2014.0-2014.5 Dn 24.5 Aluminum 2097.0-2097.5 Dn 16 Nickel 17580.0-17585.0 Up 180 Tin 24900.0-24905.0 Up 255 Aluminum Alloy 1880.0-1890.0 Up 10 Aluminum Alloy-NASAAC 1920.0-1930.0 Dn 20
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