LME aluminium to see range-bound trading

LME aluminium will struggle around the 5-day and 10-day moving averages and trade in a tight range of USD 1,540-1,560/mt on Monday.

SHFE 1607 aluminium will find support at the 5-day and 20-day moving averages and move at RMB 12,350-12,550/mt.

In China’s spot aluminium market, spot premiums of RMB 0-40/mt are expected over SHFE 1606 aluminium contract.

Key macroeconomic indicators for base metal prices

Major economic indicators due for release this week include May manufacturing PMIs in the Europe and the US, revised Q1 growth in Germany, UK and the US and profit at China’s large industrials in April. The G7 meeting held last week will also remain the focus of markets. Investors hope developed countries will maintain easy monetary policy.

Manufacturing PMIs in Europe and US have been below the second half of 2015 recently. Eurozone manufacturing PMIs fell across the board, with fluctuation in Germany’s PMI the smallest. France’s manufacturing PMI has been below 50 for the second straight month. The index in the UK fell 1.8 to 49.2. The country will hold a referendum in early June as to whether it will remain in the EU.

Revised Q1 growth in Germany, UK and the US will be announced this week. Q1 growth slowed in the US due to decreasing non-residential fixed asset investment, household spending and exports.

Profit at China’s large industrials in April is not promising. Despite rising April PPI, investment in private sector slowed noticeably. Value added at industrials also decreased, meaning large domestic producers are cautious toward production.

G7 meeting was held last Friday. Uncertainties whether the meeting will hold onto easy monetary policy will accelerate yuan’s devaluation. This will also grow volatility in base metal prices this week.

Base metals should remain weak this week, but rebound is also likely.