Metals robust and build on mini-rally, prices set multi-month highs again

Base metals were in positive territory during Monday LME premarket trading, extending and building on the mini-rally that emerged last week.

The short-term fundamentals and technicals are adding to momentum, traders said.

“The metals are in good shape at the moment and it is important to remember that these are internationally traded commodities, so the Brexit issue is not the main game in town,” a trader said.

“We saw a good end to the first half last week, so that should attract some investment money,” he added.

Follow-through buying was seen today, with nickel gaining –  the price pierced $10,000 again to set a new eight-month high, bolstered by concerns that political change in the Philippines will disrupt mining. Among others, copper, aluminium and tin clocked up two-month highs, zinc set a new one-month peak and lead a fresh three-month best.

Traders said short-term sentiment was only momentarily affected by after the UK’s surprise vote to leave the EU just over a week ago. Instead, a combination of increased risk appetite and a perception that central banks in all regions will soon launch new stimulus measures to shore up liquidity and growth has tilted the bias to the upside.

Key Chinese figures PMI figures released Friday were below-par – the June Caixin reading was 48.6, which was below the forecast of 49.1 and May’s 49.2. A number under 50 indicates contraction in activity.

In other markets, the UK FTSE slipped back slightly after starting higher, while the dollar was steadier against the euro at around 1.1100.

Business levels today will be less intense than the latter end of the previous week due to the US Independence Day market closures. This will be the exception; new-month interest is expected to flow in coming days while July traded options expire on Wednesday.

The data side will be skimpy today given the US holiday. So far the EU May Sentix investor confidence figure has undershot at 1.7, well below a predicted 8.1. There will be eurozone producer prices figures later this morning.

The focus for the rest of the week will then increasingly switch towards the US employment scene, building up to Friday’s non-farm payrolls figures for June.

In the metals, copper hit $4,960 in Asia before settling back at $4,933 per tonne, a $22 gain from Friday. The market is looking to sustain its current momentum, targetting the $5,000 level overhead. In warehouse stock data, inventories fell a net 725 tonnes to 188,400 tonnes.

Nickel climbed to $10,370, holding at $10,330, up $345 from Friday. The new mining minister in the Philippines has announced plans to review all mining operations in the country, which has provided fundamental lift to prices, which are also being spurred by option-related activity.

Stocks, meanwhile, were down another 1,452 tonnes at 378,114 tonnes, a fresh low since October 2014.

In others, aluminium traded at $1,666.50, up $2.50, and continues to build a solid downside base – inventories fell 7,025 tonnes to 2,375,075 tonnes, the lowest again since January 2009.

Zinc peaked at $2,168.50 and then held at $2,160, a $5 advance – stocks dropped 600 tonnes to 442,100 tonnes. Lead was $19 higher at $1,869, having hit $1,872, while inventories were unchanged at 185,150 tonnes.

Tin was trading at $17,850, up $450, although stocks climbed 65 tonnes to 6,050 tonnes. Steel billet, cobalt and molybdenum were neglected.

(Editing by Mark Shaw)