US president Donald Trump’s speech to Congress did not upset markets and manufacturing data out of China this morning has provided a firm base for the metals’ outlook. Today’s firmer tone also follows on from some follow through buying on Tuesday that saw the base metals complex climb an average of 0.5%, led by a 1.5% rise in tin and a 1.3% gain in aluminium.
Precious metals are split, bullion prices are off slightly, with spot gold prices at $1,243.71 per oz, while the PGMs are up an average of around 0.5% - this after a generally weaker day on Tuesday when prices closed down an average of 0.8%.
In Shanghai this morning, the base metals on Shanghai Futures Exchange are up an average of 0.7%, with aluminium, copper and zinc prices leading on the upside with gains of 2%, 1.5% and 1.3% respectively, with copper prices at 48,540 yuan per tonne, lead and nickel are little changed, while tin prices are down 0.6%. Spot copper prices in Changjiang are up 1.3% at 48,160-48,360 yuan per tonne, the LME/Shanghai copper arb ratio has edged up to 8.08.
In other metals in China, May iron ore prices on the Dalian Commodity Exchange are off 1.3%, on the SHFE, steel rebar is down 1.2%, gold prices are off 0.9% and silver prices are off 0.6%. In international prices, spot Brent crude oil prices are slightly weaker at $56.38 per barrel, while the yield on US 10-year treasuries has edged up to 2.413%.
Equities saw the Euro Stoxx 50 climb 0.3% on Tuesday, but the Dow broke its twelve-day winning streak, it paused by edging lower by 0.1%. In Asia this morning, markets are for the most part slightly firmer with the Nikkei up 1.4%, the Kospi is up 0.3%, the Hang Seng is up 0.2%, the CSI 300 is up 0.1%, although the ASX 200 is off 0.1%. With Trump’s speech giving a lot of rhetoric but little detail the market has switched its focus to the US Federal Reserve and with the tone from the Fed getting more hawkish about a March rate rise, equities may start to face some headwinds. Lack of detail from Trump could add to that too.
In FX, the more hawkish US Fed has lifted the dollar index that was recently quoted at 101.71, and strength in the dollar is weighing on other currencies with the euro at 1.0540, the sterling at 1.2356, the yen at 113.60 and the Australian dollar at 0.7642. Emerging market currencies remain on a back footing too.
The economic agenda is extremely busy today, Japan’s final manufacturing PMI dipped to 53.3, as did China’s non-manufacturing PMI that came in at 54.2 from 54.6, but China’s manufacturing PMI climbed on both counts with the official data rising to 51.6 from 51.3 and the Caixin manufacturing index shot up to 51.7 from 51. Later today there is more PMI data out across Europe and the USA, plus German CPI and unemployment change, UK lending, US personal income, spending and PCE prices, construction spending, crude oil inventories, total vehicle sales and the Beige book – see table below for more details.
The base metals should take comfort from the better Chinese PMI manufacturing data and we expect that to be the main driver, but a more hawkish Fed and the stronger dollar that brings, may act as headwinds. That is, unless the markets’ view is that a more hawkish Fed signals the US recovery is gaining momentum, which would be a bullish factor, especially while interest rates are still relatively low. For now we remain bullish for the industrial metals, but with so much data out today and important data out over the rest of the week, there will be room for some increased trading activity/volatility. Also note that today is options declaration.
Gold prices are reacting to the bullishness in other markets and are easing accordingly as the bullishness raises the opportunity cost of holding gold. That said, with US president Trump’s speech not giving much substance there is still room for disappointment and as we move into March the focus on geopolitical issues in Europe will increase. As such, we would expect any dips in gold prices to be well supported. Silver and the PGMs may manage to hold up better than gold, given their industrial attributes.
Metal Bulletin publishes live futures reports throughout the day, covering major metals exchanges news and prices.
|SHFE Prices 06:45 GMT||RMB||Change||% Change|
|Average change (base metals)||0.7%|
|12:01am||UK||BRC Shop Price Index y/y||-1.0%||-1.7%|
|12:30am||Japan||Final Manufacturing PMI||53.3||53.6||53.5|
|1:45am||China||Caixin Manufacturing PMI||51.7||50.9||51.0|
|7:00am||UK||Nationwide HPI m/m||0.2%||0.2%|
|All Day||Germany||Prelim CPI m/m||0.6%||-0.6%|
|8:50am||France||Final Manufacturing PMI||52.3||52.3|
|8:55am||Germany||German Unemployment Change||-10K||-26K|
|8:55am||Germany||German Final Manufacturing PMI||57||57|
|9:00am||EU||Final Manufacturing PMI||55.5||55.5|
|9:30am||UK||Net Lending to Individuals m/m||4.0B||4.8B|
|9:30am||UK||M4 Money Supply m/m||-0.1%||-0.5%|
|Tentative||Germany||German 10-y Bond Auction||0.33|2.2|
|1:30pm||US||Core PCE Price Index m/m||0.3%||0.1%|
|1:30pm||US||Personal Spending m/m||0.3%||0.5%|
|1:30pm||US||Personal Income m/m||0.3%||0.3%|
|2:45pm||US||Final Manufacturing PMI||54.4||54.3|
|3:00pm||US||ISM Manufacturing PMI||56.2||56.0|
|3:00pm||US||Construction Spending m/m||0.7%||-0.2%|
|3:00pm||US||ISM Manufacturing Prices||68.5||69.0|
|3:30pm||US||Crude Oil Inventories||1.5M||0.6M|
|All Day||US||Total Vehicle Sales||17.7M||17.6M|
|6:00pm||US||FOMC Member Kaplan Speaks|
|11:00pm||US||FOMC Member Brainard Speaks|