Nifty Metal spikes over 1.5% on US Fed rate cut hopes; Hindustan Zinc hits record high

Indian metal stocks resumed their upward momentum on Friday, with the majority of Nifty Metal constituents trading positively. This surge was fueled by increasing optimism surrounding potential U.S. Federal Reserve rate cuts and positive indicators of a strengthening Chinese economy, resulting in a spike in base metal prices.

The Nifty Metal index finished today's trade with a gain of 1.54%, reaching 8,977 points. Looking at the individual stocks, Hindustan Zinc jumped over 18.65% to hit a new high of ₹541 apiece, and Hindustan Copper and Vedanta also gained over 4% in today's intraday trade. 

Other stocks such as Steel Authority of India, Jindal Stainless, JSW Steel, NALCO, Hindalco Industries, NMDC, Jindal Steel & Power, and Ratnamani Metals & Tubes are currently trading with gains between 0.5% and 2%. 

Jobless claims data lifts rate-cut optimism

Recent U.S. data indicates a cooling labor market, with a notable rise in initial claims for state unemployment benefits. This, coupled with last week's weak payroll report, strengthens investor expectations of imminent interest rate cuts by the Federal Reserve.

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The anticipation of rate cuts has buoyed hopes for economic growth and metal demand while potentially softening the dollar. A weaker dollar typically makes dollar-denominated metals more affordable for holders of other currencies.

Furthermore, several central banks are signaling their readiness to lower interest rates. Bank of England Governor Andrew Bailey suggested possible rate cuts as early as next month, hinting at further reductions ahead.

On the other hand, Sweden's central bank cut its key interest rate on Wednesday for the first time in eight years.

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Meanwhile, Britain's economy grew by the most in nearly three years in the first quarter of 2024, ending the shallow recession it entered in the second half of last year. Anticipated rate cuts and enhanced growth in advanced economies are encouraging indicators for metal prices.

Positive Chinese trade data

In April 2024, Chinese exports surged 1.5% year-on-year to reach USD 292.45 billion, marking a three-month high. This rebound from the previous month's 7.5% decline surpassed market expectations of 1% growth, signaling an uptick in global demand.

The data underscores strengthening global demand and is expected to contribute to domestic economic growth. With weak consumer spending domestically, Beijing is banking on robust overseas sales to bolster its economy. In the first quarter of the current calendar year, China's economy experienced robust growth, largely driven by surging export figures.

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As the largest consumer of base metals, accounting for roughly 50% of global output, any improvements in China's economy are poised to have a substantial impact on the base metals market.

Base metals jump

Copper prices jumped above $10,000 per ton in Friday's trading session on the London Metal Exchange as markets continued to gauge the extent of supply deficits against bullish near- and long-term demand. Additionally, LME aluminum, zinc, and lead prices also saw gains during today's trading.

Furthermore, gold prices also experienced a notable increase on Friday.

Also Read: Gold rises on Fed rate cut bets: 5 reasons behind yellow metal's appeal in 2024

Gold is renowned for its resilience as an investment. In periods of falling interest rates, gold prices typically ascend, as investors find bullion more attractive compared to income-paying assets such as bonds.

Moreover, geopolitical tensions contributed to a renewed safe-haven demand for gold. The stalemate in ceasefire negotiations between Israel and Hamas, coupled with reports of escalating tensions on the Ukraine frontline, further heightened geopolitical risks, adding upward pressure on gold prices.

Disclaimer: We advise investors to check with certified experts before taking any investment decisions.