Good mood in the metal markets faces several challenges

by David Fleschen

Market participants remain optimistic, which is also reflected in the metal prices: the LME industrial metals index rose to a 6-week high yesterday. The good mood is now being put to the test. Because in the United States, the first estimate for the gross domestic product of the first quarter is published today. Figures for the main euro countries and the euro zone as a whole will follow tomorrow. Already known leading and mood indicators indicate that the data will turn out to be bad. Economic output is expected to decline in all countries, the only question is how strong it will be. For the United States, our economists expect a seasonally adjusted annual rate of -4.5% compared to the previous quarter.

The GDP of the euro zone is therefore likely to have decreased by 4% compared to the previous quarter, i.e. significantly more than in the USA. The second quarter is likely to be even worse, since the corona virus has only really had a grip on the eurozone and the United States since mid and late March, respectively, and only then have all the restrictive measures to combat the virus been implemented. Along with this, the demand for metals has decreased significantly. Since the supply has not been reduced to the same extent - and in some cases not at all - experts believe that most metal markets are over-supplied.

Source: Commerzbank Research, Photo: Fotolia

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