Short term setbacks expected for base metals prices

The rally in base metals prices in recent months does not signify a “decisive break higher”, analysts at Swedish merchant bank SEB said in a note.

“The combined effect of a continued US recovery, Greece being well on the way towards securing a second bailout package, and most importantly the reserve ratio requirement cuts that have occurred in China has sent the London Metal Exchange index almost 20% higher,” they said. “Nevertheless, while positive signals dominate at present, it would be unrealistic not to anticipate at least temporary setbacks to affect one or several of these issues before growth expectations finally stabilise,” they added. This is not expected to happen before the second half of the year, the analysts said, and therefore recommend a cautious short-term approach. “Investors should aim to sell on rallies and buy on dips. Our long-term expectations remain bullish, though the ride is likely to remain bumpy in the short to medium term,” they said. “In addition to setbacks in Europe, China and possibly the US, the negative impact of a geopolitically...

Published

Claire Hack

February 29, 2012

15:50 GMT

London