Base metals climb ahead of US jobs report

Base metals were in positive territory on Friday morning while oil holds above $50 per barrel and ahead of a keenly awaited US jobs report.

The market largely shrugged off a Chinese Caixin services PMI for May that at 51.2 was a three-month low and below both the forecast of 52 and April’s reading of 51.8.

Services PMIs from eurozone countries came in mixed. Still to come is the PMI number from the US, as well as US trade balance, ISM non-manufacturing PMI and factory orders later on Friday. But the highlight will be the US payrolls report for May.

“It appears that traders are more focused on the US employment and PMI data due out later today,” Malcolm Freeman of Kingdom Futures noted.

The US employment report has grown in importance since the Federal Reserve indicated that most of its members were more comfortable with raising rates this month if data continues to suggest an improving labour market and show signs of inflation.

Still, only 21 percent of investors expect a rate increase at the June 14-15 FOMC meeting, according to the CME Group FedWatch

In other commodities, higher crude oil prices reflect the decline – albeit smaller than expected – in US crude oil stocks. Spot Brent crude price was last at $50.05 per barrel.

As expected, the Organisation of Petroleum Exporting Countries’ (OPEC) Thursday meeting in Vienna did not reach an agreement on production cuts.

But Saudi Arabia strongly promoting a new higher production ceiling sent the message that it would not open taps to flood oil markets, ANZ Research said on Friday morning.

In the metals, copper was last at $4,657 per tonne, up $49 on Thursday’s close. In today’s warehouse data, copper stocks climbed a net 150 tonnes to 153,675 tonnes.

The backwardation in cash/threes spread widened to $25.50 at the start of the week but it has since eased to $7-11.

“Still, it is likely to tighten again because there are some very large holders of nearby positions,” FastMarkets’ William Adams said.

One entity hold 30-39 percent of the warrants, one holds ‘tom’ positions equivalent of 80-89 percent of the warrants and one holds cash positions equivalent to 90-100 percent of the warrants.

Zinc is holding around its highest in 10 months – at $2,001, it was up $19. Stocks climbed 2,100 tonnes to 380,825 tonnes.

Lead remains around its highest in two weeks – it was last at $1,732.50, up $16.50. Stocks were unchanged.

Aluminium edged $6 higher to $1,546. Stocks fell 7,450 tonnes to 2,508,225 tonnes while cancelled warrants climbed 2,525 tonnes to 1,121,100 tonnes.

Tin at $16,400 was up $125 and at its highest in around two weeks. Inventories fell 215 tonnes to 7,155 tonnes – the first fall in more than two weeks.

Nickel at $8,530 was up $60 after stocks fell 2,892 tonnes to 397,116 tonnes.

Steel, cobalt and molybdenum were neglected. Molybdenum stocks and cancelled warrants both dropped 12 tonnes to 108 tonnes and zero tonnes respectively.

(Additional reporting by Vivian Teo, editing by Mark Shaw)