Base metals edged up from their worst week in a year as China’s economy showed signs of recovering, and Goldman Sachs Group Inc. said global supplies were still constrained.

Early indicators for China’s economic activity tracked by Bloomberg suggest an improvement in activity during June as Covid restrictions were gradually eased. An overall gauge of the outlook returned to neutral after deteriorating for two straight months, though the recovery remains muted.

Metals are still on track for the biggest quarterly plunge since the 2008 financial crisis amid rising fears of an industrial slowdown across major economies. It’s a partial reversal from the past two years, when metals prices benefited from a wave of bets on demand optimism and crimped supply.

“The sharp move lower in base metals prices over the past few weeks reflects almost entirely financial liquidation pressures, rather than any deterioration in fundamental conditions,” analysts including Jeffrey Currie wrote in a note. Still, price pressures would likely linger until responses including supply cuts or “extreme” inventory reductions, they said.

The LMEX index of six base metals fell 6.7% last week, its biggest weekly fall since the middle of June last year.

On Monday, zinc led early gains as all metals rose on the London Metal Exchange. Zinc was steady at $3,350 a ton as of 7:41 a.m. local time, after rising as much as 1.9% earlier. A sharp rise in premiums for spot metal over futures have pointed to the risk of a supply squeeze in the metal.

Source:
courtesy of BLOOMBERG

by Bloomberg News

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