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LME METALS round-up: 22 February

The metal markets were disappointed by the relatively modest return of Chinese buyers after their New Year holiday. Volumes were up, but prices were not. Nor did President’s Day in the US do anything to help, and analysts feared that metals could face a sell-off if there was no evidence of fresh demand during the rest of the week.

Chinese retail sales disappointed. They grew relatively modestly by 14.7% year-on-year during the week of the New Year holiday, compared with 16.2% last year, which was also the weakest performance since a 13.8% increase in 2009. There was a suggestion that it was a consequence of the government’s clampdown on extravagant official entertainment spending.

Japan’s GDP fell at an annualised rate of 0.4% in the final quarter of 2012, following a revised third-quarter fall of 3.8%, according to official figures. A small rise had been expected, so data tended to vindicate the new government’s desire to stimulate the economy.

The meeting over the weekend of the G20 group of economies mouthed the usual pious sentiments about avoiding competitive devaluations. But this coincided with comments by Bank of England monetary policy committee member Martin Weale suggesting that a weaker pound may be needed to rebalance the UK’s economy, although he stopped short of proposing such a policy.

Figures from the Federal Reserve showed that US industrial production fell by 0.1% month-on-month in January after having risen by 0.4% in December; production was up by 2.1% between January 2012 and January 2013. At the same time, capacity utilisation stood at 79.1% in January, down from 79.3% in December.

German GDP contracted by 0.6% between the third and the fourth quarters of last year, according to the Federal Statistics Office. The ZEW economic research institute, meanwhile, reported that its indicator of economic sentiment for Germany had improved by 16.7 points in February to stand at 48.2. This was the third increase in a row and pointed to economic improvement in the coming months. A similar indicator for the eurozone has improved by 11.2 points to 42.4, added ZEW.

But the European statistical agency Eurostat noted that GDP in the eurozone contracted by 0.6% between the third and fourth quarters of last year.

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