METALS MORNING VIEW 05/04: Metals prices consolidate after Wednesday’s nervousness

Base metals prices on the London Metal Exchange are mixed this morning, Thursday April 5. The main movers are nickel, with prices up by 0.6% at $13,230 per tonne, and zinc where prices are down by 0.5% at $3,237 per tonne. Copper prices are up by 0.1% at $6,721 per tonne.

Volume has been light with 2,187 lots traded as of 06.46 am London time, this because China is off for the rest of the week to mark the Qing Ming Festival, or tomb-sweeping day.

This morning’s performance follows a down day on Wednesday, when prices fell by an average of 1.3%, led by a 2.6% fall in nickel prices.

Precious metals are for the most part weaker this morning, with gold down by 0.4% at $1,329.16 per oz, silver and platinum both off by 0.3%, while palladium is up by 0.1%. This follows on from Wednesday when gold was little changed, while the more industrial precious metals closed down between 0.4% and 0.9%.

In wider markets, spot Brent crude oil prices are up by 0.08% at $68.31 per barrel and the yield on US 10-year treasuries is firmer at 2.81%, as is the German 10-year bund yield at 0.51%.

Equity markets in Asia are firmer this morning: Kospi (+1.24%), Nikkei (+1.9%) and the ASX 200 (+0.54%). This follows a mixed performance in western markets on Wednesday, where in the United States the Dow Jones rebounded with a 0.96% to 24,264.30, and in Europe where the Euro Stoxx 50 closed down by 0.20% at 3,340.35.

The dollar index at 90.20 is little changed but it is looking stronger – each move above 90.45 and 90.94 would improve the currency’s outlook. The euro at 1.2271 is looking potentially top-heavy, sterling is consolidating at 1.4064, as is the Australian dollar at 0.7691, while the yen is looking weaker at 106.89. The yuan is giving back more of its recent gains – it was recently quoted at 6.3045. Most of the emerging market currencies we follow are split into two groups with the rupiah, rupee and real on a back footing, while the ringgit and peso are showing strength and the rand is giving back some of its recent gains.

The economic calendar is busy today with data out already showing Germany’s factory orders rising 0.3%, which was an improvement on the previous 3.9% decline, but was short of the 1.6% gain expected. Data out later includes services purchasing managers’ index (PMI) data out across Europe and United Kingdom, along with data from the United States that includes Challenger jobs cuts, initial jobless claims, trade balance and natural gas storage. In addition, US Federal Open Market Committee Member Raphael Bostic is speaking.

Heightened trade tensions pulled the rug from under the industrial metals prices on Wednesday, which saw prices give back varying degrees of the gains seen last week and on Tuesday. Wednesday’s sell-offs did leave underlying tails on the day’s candlestick charts which suggested there was further dip buying around. That said, sentiment in the metals remains weak and given weaker economic data and the potential for trade disputes, it is not surprising consumers are waiting on the side-lines to see how events pan out. Overall, we remain bullish on the outlook for the global economy, so we see the correction as temporary and are on the lookout for buying opportunities – any let-up in trade tensions may well spark another round of buying from consumers and investors alike.

With trade officials leaving the door open for further negotiations, the market seems to have calmed down and that has reduced demand for haven assets. Gold prices have as a result eased (so has the yen). Gold prices are back in the middle of the recent range which runs between $1,310-1,360 per oz. We expect choppy trading ahead until a clearer direction on trade emerges. The platinum group metals are suffering harder and trending lower, while silver prices are not holding up as well as gold prices, but they have yet to break into a downward trend.

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