Possible stimulus by Chinese goverment: Impetus for industrial metals markets

by David Fleschen

The prospect of stimulus measures on the part of the Chinese government provided positive impetus for the industrial metals markets. The government announced that monetary policy would be eased to ensure sufficient liquidity. Specifically, it mentions a reduction in the minimum reserve rate as a planned measure. This is seen as a reaction to the recent sharp rise in Corona infection rates, which have fuelled concerns about the economy in view of the adherence to the zero-covid policy.

However, it is doubtful whether a cut in reserve ratios will be sufficient to allay concerns if there are indeed renewed far-reaching lockdowns, such as in the spring. Stronger support measures are likely to be needed to prop up the markets in such a case. The potential for a setback in industrial metal prices therefore remains high.

Source: Commerzbank Research, Photo: Fotolia

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