Base metals to fall after rising this week, SMM says

Base metal prices are expected to rise at first, and then drop this week, Shanghai Metals Market foresees.

“A series of risky events will be released later this week, and risk aversion sentiment will grow as the week progresses,” SMM says.

Key Macroeconomic Indicators for Base Metal Prices:

Aluminium: 11,860-11,990 yuan per tonne

Manufacturing PMIs from western economies for May will come under the spotlight this week. “Black swan” events may occur, including semiannual financial report by US Fed head Janet Yellen and referendum on UK exit from the EU, which will intensify risk aversion.

France might be the drag on euro zone’s manufacturing PMI. Manufacturing sector in Italy and Spain, however, has been positive after austerity measures.

US building starts and home sales have been largely stable for months. US new home sales are expected to hold stable as well in May.

US Fed head Janet Yellen will give semiannual financial report this Tuesday and Wednesday. Janet Yellen has made her stance clear in the news conference after the June meeting. So, the report may offer nothing new. The US Fed hinted that it will raise interest rate just once this year. Both houses of the US might raise questions to Janet Yellen over international hot topics and their relevance to US economy. Janet Yellen’s remarks will be more cautious ahead of referendum on UK exit from the EU.

Referendum on UK exit from the EU will be held on June 23, and result will be released on June 24. The pound will fall further is the UK chooses to leave the EU, which will trigger selloffs in commodity market and turn investors to gold and bonds as safe harbor. The pound will rebound if otherwise. Once other members of the euro zone follow UK in exiting the EU, fate of EU will take a hit.

Risks will dominate in the second half of the week. Base metals prices are expected to rise at first before falling back.

Note: All prices above are forecasts for most actively-traded contracts on each market.