The Third Plenum is set to give a boost to base metals – TDS

The gathering of top Chinese party officials amid the Third Plenum has kept base metals from weakening further, as traders await for signs of additional stimulus to turn the tide, TD Securities senior commodity strategist Daniel Ghali notes.

Third Plenum to provide information on structural reforms

“The Third Plenum promises to offer additional information on structural reforms. Traders will be watching for information regarding China's plan to tackle the downward spiral in real estate, alongside plans for local government finances, ‘new quality productive forces’ including the metal intensive new energy industries.”

“For the time being, our real-time gauge of global commodity demand continues to plummet, pointing to a hangover from stockpiling associated with the squeeze on Comex Copper in an otherwise deteriorating local demand environment.”

“Commodity Trading Advisors (CTAs) could still modestly add to their length in Copper markets. Our simulations suggest that algos are likely to buy back some length in nearly every scenario over the next week. Aluminium markets appear particularly vulnerable to additional algo liquidations.”