METALS MORNING VIEW 06/03: Metals prices under pressure as China lowers growth target

Base metals prices on the London Metal Exchange are weaker this morning, Monday March 6, down by an average of 0.9%. Concerns about a lower growth target of 6.5% in China seem to be weighing on sentiment.

Zinc and lead prices lead on the downside with prices off either side of 1.6%, with copper, aluminium and tin down around 0.8% and nickel is off 0.1%. Three-month copper prices are at $5,892 per tonne and volume across the complex has been high with 9,607 lots traded as of 06:50 GMT.

Gold prices are little changed this morning at $1,231.94 per oz, as are palladium prices at $773.90 per oz, while silver and platinum prices are weaker by 0.9% and 0.5%, respectively. Gold prices seem to be underpinned by weakness in other markets and as a result of a pick-up in geopolitical tensions as North Korea fired four ballistic missiles into the Sea of Japan.

In Shanghai, nickel prices are up 0.8% on Shanghai Futures Exchange, while the rest are down between 0.4% for copper prices (47,970 yuan per tonne) and 2.3% in lead, with zinc prices down 2%. Spot copper prices in Changjiang are up 0.5% at 47,830-48,030 yuan per tonne, which indicates prices opened higher in China but have since weakened. The LME/Shanghai copper arb has picked up with the ratio at 8.14.

In other metals in China, May iron ore prices on the Dalian Commodity Exchange are down 2.8%, while on SHFE steel rebar prices are off 0.7%, silver prices are down 0.7% and gold prices are off 0.1%. In international markets, spot Brent crude prices are off 0.4% at $55.50 per barrel and the yield on the US 10-year treasuries is around 2.47%.

Equities were firmer on Friday with the Euro Stoxx 50 up 0.6%, although the Dow only closed up a few points, but the market is mixed this morning in Asia with the Nikkei off 0.5%, the Hang Seng is up 0.3%, the CSI 300 is up 0.5%, the ASX 200 is up 0.3% and the Kospi is up 0.1%. Premarket, European equities look set to open weaker.

In FX, the dollar index retreated on Friday March 3, with the index falling to 101.44 from Thursday’s peak of 102.27. The euro is firmer at 1.0604, the sterling is getting some lift at 1.2286, as are the yen at 113.73 and the Australian dollar at 0.7586. The yuan is weaker at 6.8943, but the weaker tone in the dollar is supporting other emerging market currencies.

The economic agenda is relatively light today with data out on EU retail PMI, Sentix investor confidence and US factory orders. UK Monetary Policy Committee member Charlotte Hogg and US Federal Open Market Committee (FOMC) member Neel Kashkari are speaking – see table below for more details.

All the base metals prices are under pressure this morning and the fact this is happening in conjunction with a weaker dollar suggests, suggests a degree of risk-off is unfolding. On the charts, most of the metals are looking weaker, the exception are nickel and tin. Copper prices are consolidating in low ground, aluminium is retreating, while lead and zinc prices have breached recent support levels so are looking the weakest of the lot. The overall pattern in the base metals seems to be that dips run into buying, so we wait to see how far prices pull back before finding support.

Gold prices started to show weakness last week and the more hawkish tone from the US Federal Reserve is no doubt weighing on prices. That said, Friday’s dip did attract some buying, so again there seems to be good underlying support and North Korea’s missile firing will have added some support. The other precious metals are following gold’s lead. Overall, we expect price dips to remain well supported, especially if there are any developments that make the market question whether there will be a US rate rise at the FOMC meeting on March 15 - Fed fund futures point to a 79.7% chance of a 25 basis point rise.

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

Overnight Performance
GMT 06:50 +/- +/- % Lots
Cu 5892 -47 -0.8% 2757
Al 1875.5 -15 -0.8% 1275
Ni 10960 -15 -0.1% 1373
Zn 2738 -46.5 -1.7% 3445
Pb 2216 -33 -1.5% 754
Sn 19360 -135 -0.7% 3
  Average -0.9%        9,607
Gold 1231.94 -2.51 -0.2%  
Silver 17.799 -0.161 -0.9%  
Platinum 991.7 -5.3 -0.5%  
Palladium 773.9 0.9  0.1%  
  Average PM -0.4%  


SHFE Prices 06:50 GMT RMB Change % Change
Cu 47970 -180 -0.4%
AL  13785 -240 -1.7%
Zn 22365 -455 -2.0%
Pb 18145 -425 -2.3%
Ni 91030 760 0.8%
Sn 145220 -950 -0.6%
Average change (base metals)     -1.0%
Rebar 3475 -24 -0.7%
Iron ore 660 -19 -2.8%
Au 277.65 -0.35 -0.1%
Ag 4171 -30 -0.7%


Economic Agenda
GMT Country Data Actual Expected Previous
9:10am EU  Retail PMI     50.1
9:30am EU  Sentix Investor Confidence 18.8 17.4
11:30am UK MPC Member Hogg Speaks  
3:00pm US  Factory Orders m/m 1.1% 1.3%
8:00pm US  FOMC Member Kashkari Speaks      

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