Aluminium dropped as markets continued to gauge the demand outlook from China

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Aluminium dropped as markets continued to gauge the demand outlook from China
Credit: © Reuters.

Aluminium closed with a slight decline of -0.22% at 207.95 as markets closely monitored China's demand outlook. Beijing's plan to inject CNY 1 trillion in extra debt to boost manufacturing and infrastructure raised questions as PMI data revealed unexpected contractions in China's manufacturing sector. The impact of these investments on output remains a concern. Chinese officials made statements about opening their economy and increasing commodity and services imports, aiming for nearly $17 trillion in the next five months.

On the other hand, the weakening US dollar followed a monthly payrolls report, fueling expectations of a December interest rate hike by the Federal Reserve. Monitoring industrial metals imports in China and consumer prices will be crucial to assess the impact of Chinese stimulus on the economy. In the US, the trade deficit widened to $61.5 billion in September 2023, surpassing forecasts and marking the third-lowest deficit since 2021. In Germany, the Construction PMI fell to 38.3 in October, signalling a deterioration in the country's construction sector health.

Technically, the market witnessed long liquidation with a -0.54% drop in open interest and a -0.45 rupee price decrease. Support levels are seen at 207.5 with a potential test of 207, while resistance is expected at 208.7, possibly leading to prices testing 209.4 if surpassed.

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