Metals sustain advances, risk appetite picks up as political doubts ease

Base metals moved steadily higher during Tuesday LME premarket trading, capitalising on an upturn in risk appetite, a softer dollar and a cranking-down in geopolitical uncertainty.

Bellwether copper climbed back above the $4,800-per-tonne level to a one-week high and nickel is just below recent eight-month highs.

“What we are starting to see is markets getting back to a more normal way of operating and reacting after the last two weeks and people coming round to the idea of what the Brexit decision means for the world economy,” a senior trader said.

“The stock markets are rising, the pound has maybe found a floor for now and, with a new government in the UK, things can move forward from here,” he said.

Consistent gains in equity markets coupled with diminishing political uncertainty in the UK – Theresa May will take over as prime minister from David Cameron on Wednesday – has decreased post-Brexit vote tensions and turbulence. Although the reduction in volatility has dampened activity and volumes, the metals are settling into more-normal directional trading.

In other markets, the dollar slipped back to around 1.1110 against the euro while European equities were steady, building on the strength seen in global stock markets on Monday. The FTSE 100 was up 0.2 percent at around a 2016 high.

On the data side, Japan’s PPI fell 4.2 percent while in Europe the German CPI rose 0.1 percent and its PPI climbed 0.6 percent. US data out later includes the small business index and job openings and wholesale inventories figures.

The key macroeconomic figures late this week will be Chinese trade balance GDP data while on Thursday there is the possibility of monetary easing in the UK and a reduction in interest rates.

In the metals, copper rose to $4,828, up $78 from Monday’s close and ignoring a big increase in LME inventories, the latest in a run of Asian warehouse warrantings. Stocks rose a net 12,150 tonnes to 234,750 tonnes, the highest since early-February. In Asia, 8,500 tonnes were warranted in Singapore and 3,200 tonnes in Busan.

Aluminium was confined to a narrower band, picking up to $1,658, up just $5 from yesterday. The market has been inhibited by Chinalco, the largest Chinese aluminium manufacturer, announcing plans to scale up its capacity to 1.5 million tonnes per year. Inventories continue to fall, with a 6,050-tonne fall to 2,338,125 tonnes, the lowest since December 31, 2008.

Nickel continues to draw support from Philippines supply concerns – the country is making an audit of all operating mines in the country while suspending the approval of new mining projects. Business at $10,380 was up $335, with a test of last week’s $10,410 – its highest since November last year – on the cards.

In others, zinc traded at $2,162, up $42, with stocks falling 125 tonnes to 439,450 tonnes. Lead was $34 higher at $1,853, with no change seen in inventories, which held at 184,525 tonnes.

Tin rose $90 to $17,940, with stocks unmoved at 6,045 tonnes. Steel billet, cobalt and molybdenum were neglected.

(Editing by Mark Shaw)