Base metals were hovering close to previous levels during LME pre-market trading on Wednesday, with a pause setting in while financial markets continue to reshape after the UK vote last week to exit the European Union (EU), traders said.
“The markets are taking stock now – its less panicky on equities and it is the same for metals. Once you get past the initial knee-jerk stuff that has to be done, people hold off for a while,” a trader said.
But prices are still seen encountering increased volatility until global economic trends and European geopolitical trends become clearer, with moves such as the previous session’s solid rallies interspersed with sudden downswings.
The drivers for the rebound on Tuesday were a broad-based recovery in global equity markets, a downturn in the dollar and a softening in safe-haven gold prices.
Today, stock markets sustained advances – the FTSE 100 rose another 1.7 percent to some 6,240. The dollar was stable around 1.1070 against the euro while, after rising yesterday, the British pound pushed higher still against the dollar to some 1.3395.
Metals have proved relatively resilient since last week’s referendum result. The initial dip was not significant so the subsequent influx of risk-appetite flows on Tuesday helped lift copper and nickel to their best levels for close to two months and zinc to a two-week peak.
“The Brexit issue appears to be gradually taking a back seat on the metal markets,” broker Commerzbank noted in a report.
But the uncertainty generated by ‘Brexit’ and a lack of clarity are expected to see some sizeable price swings over the coming usually-slow summer period. Ahead of that, the end of the first half of the year this week is anticipated to result in portfolio positioning and window-dressing operations.
Also, European political developments from the EU Brussels meeting and important end-week data events are likely to add to ‘news-flow’ price turbulence.
Economic releases today have seen the German GfK consumer climate index for June – assessed before the Brexit vote – at 10.1 against a forecast 9.8. Later, US data figures include the core PCE price index, personal spending, personal income, pending home sales and crude oil inventories. On Friday, attention switches to the usual round of global PMIs that kick off with China’s two indicators.
In the metals, copper, which peaked at $4,830 on Tuesday, was trading at $4,790 per tonne, down $28 from the previous close. Warehouse stocks rose a net 1,250 tonnes to 194,200 tonnes.
Nickel, yesterday’s other high-flier, was at $9,275, a $65 loss but building on the break back above the $9,000 level that prices have repeatedly see-sawed around over the last few weeks. Inventories continue to decline – they were down 798 tonnes at 380,286 tonnes, the lowest since late-October 2014.
Aluminium business at $1,621 was down just $3 from yesterday while stocks fell 6,700 tonnes to a fresh low since January 2009 at 2,393,600 tonnes.
In others, zinc was trading at $2,060, $15 lower but fairly stable following the markets’s strong rally back above $2,000 on Tuesday. Inventories were 2,350 tonnes lower at 426,225 tonnes.
Lead traded at $1,732, down $3, while inventories rose 900 tonnes to 186,250 tonnes. Tin traded at $16,835, a $65 loss, although stocks fell 25 tonnes to 6,060 tonnes.
Steel billet, cobalt and molybdenum were all neglected, with no inventory movements.
(Editing by Mark Shaw)