METALS MORNING VIEW 26/01: Base metals prices work higher in thin volume

Base metals are firmer this morning, Thursday January 26, with prices up an average of 0.3%. Nickel prices are up the most with a 0.6% gain to $9,795 per tonne, tin is untraded, while the rest are up between 0.2% and 0.4%, with copper prices up 0.3% at $5,962 per tonne as it flirts with $6,000 per tonne.

Volume at 3,695 lots, as of 06:00 GMT, has started to slow down ahead of the Chinese Lunar New Year holiday that starts on Friday. This morning’s firmer tone comes on the back of a general weakness on Wednesday that saw prices close down an average of 0.8%.

Precious metals prices this morning are down an average of 0.2%, led by a 0.5% fall in palladium prices, gold prices are off 0.2% at $1,198.77 per oz, while silver prices are off 0.3% and platinum was little changed. This morning’s performance comes after a steep decline on Wednesday that saw prices close down an average of 2.1%, although that was skewed by a 6.4% fall in palladium prices, while the rest were down between 0.6 and 0.9%.

In Shanghai this morning, lead prices are up 0.6%, while aluminium prices are down 2.5%, see table below for more details. March copper prices are little changed at 47,640 yuan per tonne, spot copper prices in Changjiang are off 0.1% at 47,360-47,560 yuan, putting the spread in a small contango, while the LME/Shanghai copper arb ratio has slipped to 7.99.

In other metals in China, May iron ore prices are up 2.3% on the Dalian Commodity Exchange, on SHFE steel rebar is up 1.6%, silver prices are down 1.7% and gold prices are down 1.1%. In international markets, spot Brent crude oil prices are 0.5% firmer at $55.50 per barrel.

The Dow finally hit the 20,000 level, it closed up 0.8% at 20,068, the Euro Stoxx 50 closed up 1.4%. Asia is bullish this morning with the Nikkei up 1.8%, the Hang Seng is up 1.3%, the CSI 300 is up 0.4%, the Kospi is up 0.8% and the ASX 200 is up 0.5%. More confidence in earnings and some executive orders from US president Trump and signs that he was taking steps to fulfil some of his pre-election promises have all helped underpin sentiment.

In FX, the dollar index has resumed its slide with the index setting a fresh low at 99.79, the euro at 1.0740 is consolidating, as are the yen at 113.66 and Australian dollar at 0.7564, while the sterling, at 1.2646, is rebounding. Emerging market currencies are on balance firmer, even the Mexican peso, with the rand looking particularly stronger as it approaches the November and August lows around 13.2000.

The economic calendar is busy today with data including Spanish unemployment, German GfK consumer climate, Italian retail sales, UK GDP and realised sales, with US initial jobless claims, new home sales, leading indicators and flash services PMI – see table below for the full list.

Despite some pullbacks on Wednesday, base metals prices generally seem to be holding up well and within striking distance of previous highs, the exceptions are nickel and tin that have corrected lower recently. Aluminium prices also pulled back more than most on Wednesday, but they had been the strongest by far in recent weeks. This general strength in the run up to the Chinese New Year holidays suggests sentiment remains strong, which bodes well for the second part of the first quarter once Chinese businesses return after the holiday. We may see increased volatility next week when trading volumes are thinner.

The lack of any geopolitical shocks so far since the new US administration has taken office seems to be reducing demand for gold as a haven and with other markets still buoyant, the opportunity cost of holding gold is rising again. As such, prices are drifting lower as they look for support. But, with gold prices having rallied $97 per oz since mid-December, the $27 per oz pullback is, so far, fairly limited. Palladium prices fell sharply on Wednesday, which went a long way into correcting its strong performance seen so far this year. Prices dropped 6.4% on Wednesday, but had rallied 19% since the start of the year.

Metal Bulletin publishes live futures reports throughout the day, covering major metals exchanges news and prices.

Overnight Performance

GMT

05:59

+/-

+/- %

Lots

Cu

5962

16.5

0.3%

1045

Al

1841.5

8

0.4%

659

Ni

9795

60

0.6%

1364

Zn

2809.5

7.5

0.3%

563

Pb

2383.5

4

0.2%

64

Sn

20440

0

0.0%

0

 

Average

0.3%

        3,695

Gold

1198.77

-1.98

-0.2%

 

Silver

16.92

-0.045

-0.3%

 

Platinum

982.7

0.7

0.1%

 

Palladium

731.4

-3.6

-0.5%

 

 

Average PM

 

-0.2%

 


SHFE Prices 05:59 GMT

RMB

Change

% Change

Cu

47640

30

0.1%

SHFE Prices 05:59 GMT

RMB

Change

% Change

Cu

47640

30

0.1%

AL

13670

-350

-2.5%

Zn

22765

-100

-0.4%

Pb

18915

120

0.6%

Ni

82440

260

0.3%

Sn

147190

90

0.1%

Average change (base metals)

0

 

-0.3%

Rebar

3341

54

1.6%

Iron ore

654

14.5

2.3%

Au

267.8

-3.1

-1.1%

Ag

4031

-68

-1.7%


Economic Agenda

GMT

Country

Data

Actual

Expected

Previous

7:00am

Spain

Spanish Unemployment Rate

 

18.9%

18.9%

7:00am

Germany

GfK German Consumer Climate

 

10

9.9

8:30am

Germany

German Buba President Weidmann Speaks

 

 

 

Tentative

Italy

Italian Retail Sales m/m

 

0.1%

1.2%

9:30am

UK

Prelim GDP q/q

 

0.5%

0.6%

9:30am

UK

BBA Mortgage Approvals

 

41.1K

40.7K

9:30am

UK

Index of Services 3m/3m

 

0.9%

1.0%

All Day

EU

Eurogroup Meetings

 

 

 

11:00am

UK

CBI Realized Sales

 

28

35

1:30pm

US

Unemployment Claims

 

247K

234K

1:30pm

US

Goods Trade Balance

 

-64.5B

-66.6B

1:30pm

US

Prelim Wholesale Inventories m/m

 

0.9%

1.0%

2:45pm

US

Flash Services PMI

 

54.4

53.9

3:00pm

US

New Home Sales

 

585K

592K

3:00pm

US

CB Leading Index m/m

 

0.5%

0.0%

3:30pm

US

Natural Gas Storage

 

-121B

-243B


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