METALS MORNING VIEW 15/06: Metals mixed but strong dollar a headwind

Three-month base metals prices on the London Metal Exchange were for the most part lower on the morning of Friday June 15, led by a 0.6% fall in zinc prices to $3,161 per tonne.

While nickel gained 0.3%, the rest are off between 0.1% and 0.2%. Copper prices were recently quoted at $7,153 per tonne.

Volumes have been average with 5,356 lots traded as of 0707 London time.

This follows a day of weakness on Thursday when the complex closed down by an average of 1.1%, with nickel prices falling by 2.4%, having risen by 2.6% on Wednesday.

Gold and silver spot prices are down by 0.3% with gold at $1,298.99 per oz and silver remaining relatively high at $17.12 per oz, with the gold/silver ratio falling to 1:76, down from 1:82 earlier in the year. Platinum and palladium prices are little changed with prices trading sideways.

In China, base metals prices on the Shanghai Futures Exchange are down across the board with prices down by an average of 0.7%, with the most traded August copper contract price off by 0.5% at 53,510 yuan ($8,338) per tonne.

In other metals in China, the most-traded September iron ore contract price on the Dalian Commodity Exchange was off by 0.4% higher to 470.50 yuan per tonne. Meanwhile on the SHFE, the most-traded October steel rebar contract price fell by 0.1%, while the December gold and silver contract prices were up by 0.5% and 1.2% respectively.

Spot copper prices in Changjiang were down by 0.5% at 53,010-53,170 yuan per tonne and the LME/Shanghai copper arbitrage ratio was higher at 7.48.

In wider markets, spot Brent crude oil prices were off by 0.05% at $75.84 per barrel this morning. The yield on US 10-year treasuries has weakened to 2.9296%, as has the German 10-year bund yield to 0.4100%.

Equity markets in Asia were split on Friday: Nikkei (+0.50%), ASX 200 (+1.29%), Hang Seng (-0.01%), CSI 300 (-0.65%) and the Kospi (-0.65%). Further concerns about a United States trade war are likely to weigh on markets. There was a mixed performance in western markets on Thursday, where in the US the Dow Jones closed down by 0.10% at 25,175.31, and in Europe where the Euro Stoxx 50 closed up by 1.37% at 3,527.11.

The dollar index surged yesterday and is firmer this morning at 95.04, taking it to the highest since November 2017, when it peaked at 95.15. Conversely, the other major currencies have weakened: euro (1.1564), sterling (1.3239), the yen (110.85) and the Australian dollar (0.7458). The yuan has fallen to 6.4158 and most of the emerging market (EM) currencies we follow are weaker, the exceptions being the ringgit and rupiah.

On the economic front, data already out in Europe showed Germany’s wholesale price index climb 0.8%, having previously been up 0.5%. Data out later includes EU CPI, trade balance and UK leading indicators, with US data including Empire State manufacturing index, industrial production, capacity utilizations, University of Michigan consumer sentiment and inflation expectations and treasury long term purchases (TIC).

Copper, zinc and tin prices are giving back more of their recent gains, lead and nickel prices are consolidating and aluminium prices continue to edge lower.

The stronger dollar is a headwind for the metals as is the overall concern over US trade policy. Economic data remains mixed, Chinese data earlier in the weak was disappointing, but US data out yesterday was constructive with retail sales rising by 0.8%. As such, the climate is not particularly bullish and the market may not see follow-through buying until stronger concerted economic data is seen.

Gold prices got some lift following the FOMC rate rise on Wednesday, but the stronger dollar has pulled prices back to the $1,300 per oz level. The pick-up in US trade wars is a concern for the broader markets and may well lead to some pick-up in safe-haven demand. Silver is looking particularly strong with prices back above $17 per oz.


Overnight performance
BST 07:07 +/- +/- % Lots
Cu 7,153 -7.5 -0.1% 2,399
Al 2,249 -4.0 -0.2% 691
Ni 15,320 40.0 0.3% 1,148
Zn 3,161 -19.5 -0.6% 919
Pb 2,458 -2.5 -0.1% 177
Sn 20,805 -20.0 -0.1% 22
  Average BM   -0.1%        5,356
Gold  1,298.99 -3.91 -0.3%  
Silver        17.12 -0.05 -0.3%  
Platinum      903.10 -0.90 -0.1%  
Palladium  1,008.10 0.10 0.0%  
  Average PM   -0.2%  

SHFE Prices 07:07 BST Yuan Change % Change
Cu   Aug'18     53,510         -290 -0.5%
AL   Aug'18     14,520         -155 -1.1%
Zn   Aug'18     24,155         -190 -0.8%
Pb   Jul'18     20,175         -265 -1.3%
Ni   Sep'18   115,820         -910 -0.8%
Sn   Sep'18   147,820          -30 0.0%
Average change (base metals) -0.7%
Rebar   Oct'18  3,879.00         -3.00 -0.1%
Au   Dec'18     273.80          1.30 0.5%
Ag   Dec'18  3,869.00        46.00 1.2%
Iron Ore (DCE) Sep'18 470.5 -2 -0.4%

Economic calendar
BST Country Data Actual Expected Previous
3:41am Japan Monetary Policy Statement      
3:41am Japan BOJ Policy Rate -0.1% -0.1% -0.1%
7:00am Germany German WPI m/m 0.8% 0.3% 0.5%
7:28am Japan BOJ Press Conference  
 10:00am EU  Final CPI y/y 1.9% 1.9%
 10:00am EU Final Core CPI y/y 1.1% 1.1%
 10:00am EU  Trade Balance (in euros) 20.2 bln 21.2 bln
1:30pm US  Empire State Manufacturing Index 19.1 20.1
2:15pm US  Capacity Utilization Rate 78.1% 78.0%
2:15pm US  Industrial Production m/m 0.2% 0.7%
2:30pm UK CB Leading Index m/m -0.2%
3:00pm US  Prelim UoM Consumer Sentiment 98.5 98
3:00pm US  Prelim UoM Inflation Expectations 2.8%
9:00pm US  TIC Long-Term Purchases (in $)   58.5 bln 61.8 bln

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