Base metals edge up, mood cautious ahead of central bank meetings

Base metals were all higher on Tuesday morning on the LME but volumes remain low – investors are holding fire of central bank meetings in the US and Japan this week.

The US Federal Open Market Committee will meet later on Tuesday and conclude its monetary policy meeting on Wednesday. While most market participants – only around 15 percent, according to the CME Group Fedwatch tool, compared with 12 percent last Friday – still do not anticipate the Fed raising rates  in September, 60.1 percent now see a move in December.

In Japan, the BoJ is expected to announce on Wednesday another round of stimulus to prop up the weak domestic economy. The Japanese central bank introduced negative interest rates earlier this year but that has failed to ignite inflation or reverse nearly three decades of little to no growth.

“While markets are pricing a no Fed rate hike, the BoJ is almost certainly condemned to surprise markets,” Swissquote said. “At this point of the game, there is no clear solution for the central bank, which currently sees the yen strengthening no matter what it does. As a result, there is a decent likelihood that rates will go even deeper into negative territory and that policymakers will increase their QE asset purchases.

“However, an albeit unlikely surprise from the Fed could have the potential to totally change the game for the BoJ, which could remain on hold thanks to an unexpected increase in dollar demand,” it added.

Key US data due later today includes building permits and housing starts.

In the metals, copper recently traded at $4,780 per tonne, up $4 on Monday’s close. Around 4,000 lots have changed hands on Select so far. In today’s warehouse data, copper stocks fell a net 1,675 tonnes to 347,950 tonnes and cancelled warrants fell 3,475 tonnes to 54,500 tonnes.

Aluminium edged $3 higher to $1,586. Stocks climbed 6,700 tonnes to 2,168,175 tonnes.

Nickel recently traded at $10,220, up $70 and around one-week highs. The metal returned above $10,000 on Monday on expectations that more miners will be suspended when the Philippines publishes its mining audit results on Thursday.

“Until Friday, nickel had been looking weak/neutral on the charts. [Monday’s] move suggests more gains are likely in the short term but we can’t talk about a resumption of the uptrend just yet,” broker Triland noted.

Stocks fell 1,074 tonnes to 365,784 tonnes and cancelled warrants fell 2,004 tonnes to 114,648 tonnes.

Zinc at $2,281 was up $30, with stocks were unchanged at 444,400 tonnes. Lead at $1,967 was $13 higher. Stocks were up 875 tonnes to 189,025 tonnes.

Tin nudged $5 higher to $19,355. Stocks and cancelled warrants both edged 75 tonnes lower to 3,750 tonnes and 765 tonnes.

Steel billet, cobalt and molybdenum were neglected. Molybdenum stocks and cancelled warrants both fell 12 tonnes to stand at zero.

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