ECB holds rates unchanged, eurozone data improves

Wednesday, April 15, 2015
After yesterday’s shaky session for European equity markets, today’s session saw stocks push to a fresh fourteen year high with the majority of the gains added in the morning, ahead of the ECB’s rate decision. Market participants were at large expecting the central bank to reaffirm its position on monetary policy, specifically continuing to adopt a loose stance which of course was the case as this month saw no change in the main refinancing rate, which held at a record low of 0.05% for an eighth straight month.

Equity markets started the week on a positive footing after unimpressive Chinese trade data released on Monday and softer than expected industrial production data released overnight increased the prospects that Beijing would also soon step up its monetary easing efforts in a bid to support a faltering economy. With Chinese economic growth slowing to 7% y/y in Q1 2015 from 7.3% y/y previously, its slowest pace since 2009, investors are increasingly becoming reliant on central banks efforts to support growth in the face of significant headwinds, notably sluggish demand and falling inflation.

Three month LME copper prices headed lower for the third straight session as weaker Chinese industrial production data further depressed the outlook for the red metal. Data released overnight fell short of expectations as year-to-date industrial production grew by 5.6% y/y in March, substantially lower than the 7% expected by market participants. Copper prices fell over 14% throughout January, reaching levels last seen in 2009 towards $5,300/tonne before recovering throughout the remainder of the first quarter testing levels towards $6,300/tonne at the end of March.

However, slowing growth in China has presented significant obstacles with three month LME copper prices holding tentatively onto support around $6,000/tonne last week before finally breaching this level as prices retraced back to $5,900/tonne. With limited credit availability in China despite Beijing’s best efforts and expectations that the second half of the year will see a steady flow of supply entering the market. We could then see further downside for the red metal with copper prices potentially revisiting Q1 lows lows in the short term unless we see any material improvement in demand appetite, particularly from China.

Chinese industrial production slips further in March 

CHVAIOY Index China Value Added 2015 04 15 12 42 04

Weaker Chinese data drags down 3-M LME copper prices

LMCADS03 Comdty LME COPPER 3 2015 04 15 12 42 14

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