China’s Economic Targets Lift Base Metals Prices

 All base metals on the London Metal Exchange went up during the Asian trading hours on Tuesday, but narrowed gains during the European trading session.

Base metals on the SHFE and LME rose in the morning session on Tuesday, lifted by a series of economic targets in China set during the government work report. Prices of the most active SHFE copper contracts bounced back to near the 5-day moving average, though still moving at low levels.  

According to the government work report, China has set GDP growth target for 2013 at 7.5%, CPI inflation target at 3.5%, and M2 growth target at 13%. The Chinese government also aims to expand fiscal deficit by RMB 400 billion to RMB 1.2 trillion. China will introduce tougher measures to rein in housing markets. Meanwhile, China will finish construction on 4.7 million affordable housing units and start construction on another 6.3 million units this year.

These economic targets eased market worries over slowing demand for raw materials in China, pushing base metals prices up during the Asian trading session.

The final reading of euro zone’s services and comprehensive PMI was 47.9% in February. Although the figure indicates contraction, it did beat the preliminary and forecasted reading. Retail sales in the euro zone rose 1.2% MoM in January, but fell 1.3% YoY.

The European Commission Report pointed out that uncertainty surrounding whether the Spanish economy has improved increased, bringing the euro down against the US dollar. The US dollar index closed down, but still stayed firm at the 5-day moving average and 82, putting downward pressure on base metals prices.