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Informist, Tuesday, Sep 24, 2024

By Ashutosh Pati

MUMBAI – Prices of futures of all base metals rose on the Multi Commodity Exchange of India and the London Metal Exchange after China's central bank announced fresh stimulus measures today to boost its struggling economy. Following this, the most active October copper contract on the MCX hit a two-month high of 836.40 rupees per kg, up 2% from its previous close.  

The sentiment a further boosted from a weak dollar. A weak greenback makes commodities priced in dollars cheaper for holders of other currencies. At 1655 IST, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was down 0.1% at 100.83.

China will cut the reserve requirement ratio for banks by 50 basis points and may also reduce its loan prime rate by 0.2-0.25%, People's Bank of China Governor Pan Gongsheng said at a press conference today, according to various media reports. "China needs a lower-rate environment to boost confidence," Gongsheg said.

The Chinese central bank will lower interest rates on existing mortgages by 50 bps. The minimum down payment requirement will be lowered to 15% for all home types, according to news reports. Lower interest rates reduce borrowing costs for consumers and aid demand.

This move is mostly to help buoy sentiment, as the current issue is not banks lacking the funds to lend, but rather a lack of high-quality borrowing demand amid downbeat sentiment, ING Economics said in a report.

"The bid to prop up China's moribund economy and ailing property market have provided a fresh boost for industrial metals and the wider commodities complex, which were facing demand concerns," Dow Jones said in a report.

However, analysts believe additional fiscal stimulus will be necessary to complement the central bank's initiatives. Traders now await the US Personal Consumption Expenditures Price Index and the US initial jobless claims data, due later this week.

At 1655 IST, on the MCX, the October futures contracts of:

- ALUMINIUM was at 235.05 rupees per kg, up 2.3%

- COPPER was at 834.80 rupees per kg, up 1.7% 

- LEAD was at 185.00 rupees per kg, up 1.5%

- ZINC was at 272.40 rupees per kg, up 2.3%

Trading levels for the day on the MCX:

- Aluminium contract seen at 225.00-237.00 rupees 

- Copper contract seen at 825.00-838.00 rupees

- Lead contract seen at 178.00-186.00 rupees

- Zinc contract seen at 266.40-276.00 rupees

End

US$1 = 83.67 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Deepshikha Bhardwaj

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