LME copper, nickel prices hold onto gains; the rest absorb selling

Base metals prices on the London Metal Exchange are consolidating this morning, Thursday October 12, with prices down an average of 0.2%.

Zinc and lead are both down the most (-0.5%), while three-month copper prices are little changed at $6,815 per tonne.

Volume has been lighter than in recent days, with 5,442 lots traded as of 06:33 BST.

This morning’s consolidation follows a divergent performance on Wednesday October 11 that saw nickel and copper prices up 1.3% and 0.9%, respectively, while zinc prices fell 2.2% because the high backwardation attracted more stock into warehouses. Aluminium prices fell 1.3% and lead and tin prices were mostly unchanged.

Gold, silver and platinum prices are up around 0.2%, with spot gold prices at $1,295.09 per oz, while palladium prices are off 0.1% at $958.80 per oz. This comes after a positive day yesterday where palladium prices rallied 2.8%, platinum prices rose 0.1% and bullion prices were up 0.3%

In Shanghai, copper and nickel prices are buoyant while the rest are weaker. Nickel prices are up 2.2%, while December copper prices are up 1.6% at 53,040 yuan ($8,047) per tonne. Spot copper prices in Changjiang are also firmer, up 1.6% at 53,450-53,600 yuan per tonne and the London/Shanghai copper arbitrage ratio is higher at 7.79, after 7.77 on Wednesday.

Zinc and tin prices are off the most, down 1.4% and 0.9%, respectively, with lead prices off 0.5% and aluminium prices off 0.2%.

In other metals in China, iron ore prices continue to weaken, off 2.3% at 430 yuan per tonne on the Dalian Commodity Exchange. Prices are down some 29.5% from the 609.50 yuan per tonne high seen in August. It seems the steel industry is destocking ahead of the government imposed winter cutbacks.

On the Shanghai Futures Exchange, steel rebar prices are up 0.2%, while gold and silver prices are up by 0.3% and 0.2%, respectively.

In international markets, spot Brent crude oil prices are off by 0.17% at $56.56 per barrel, the yield on US ten-year treasuries has eased to 2.33% as the US Federal Open Market Committee (FOMC) meeting minutes contained no surprises and, if anything, were slightly dovish.

The German ten-year bund yield is little changed at 0.46%.

Equities in Asia are up across the board, with the Kospi up by 0.5%, the ASX 200 and Hang Seng up by 0.4%, while the Nikkei, up by 0.3%, has reached a level unseen since 1996. Meanwhile, the CSI 300 is up 0.1%. This follows a stronger performance on Wednesday, where in the USA, the Dow closed up by 0.18% at 22,872.89, a fresh record high, while in Europe the Euro Stoxx 50 closed up by 0.24% at 3,607.39.

The dollar index is weaker again this morning at 92.82. The pullback is looking less like consolidation and more like the downward trend reasserting itself, although it is still too early to say if this is the case. It could be the index is tracing out a right hand shoulder of an inverse head and shoulder pattern, which would be bullish – if triggered.

As the dollar slides, other major currencies have strengthened, with the euro at 1.1877, sterling at 1.3259, the yen at 112.28 and the Australian dollar at 0.7821.

The Chinese yuan has become firmer in October but has been consolidating in recent days – it was recently quoted at 6.5876. The rand is firmer at 13.4942, while other emerging currencies are consolidating on a slightly firmer footing.

Data out already shows Japan’s producer price index (PPI) edged up to 3% from 2.9% in September, but tertiary industry activity dropped 0.2% from a previous reading of 0.1% in August.

Data out later includes French CPI, EU industrial production and a Bank of England credit conditions survey, while US data includes PPI, initial jobless claims and natural gas and crude oil inventories. Central bank speakers include ECB president Mario Draghi and FOMC members Lael Brainard and Jerome Powell.

Although the underlying trends in the base metals are upward, the metals in or near high ground are having to absorb selling, which is capping the upside and leading to some pullbacks. Copper and nickel prices that are still some way below their peaks seem to be working higher easily. We remain quietly bullish, but expect trading to become choppier when prices run into more bouts of scale-up selling.

All the precious metals are looking stronger again after they climbed yesterday – a weaker dollar and fairly dovish FOMC minutes are providing a tailwind for gold prices, which is providing lift to platinum and silver prices that had started to look oversold last week. The North Korea crisis seems to be simmering in the background, and any escalation in tension again is likely to fuel the rallies.

Overnight Performance
BST 06:33 +/- +/- % Lots
Cu 6815 1.5 0.0% 2141
Al 2136 1 0.0% 931
Ni 11175 -5 0.0% 871
Zn 3205 -16 -0.5% 1036
Pb 2545 -13 -0.5% 433
Sn 20775 -25 -0.1% 30
  Average -0.2%

       5,442

Gold 1295.09 2.74 0.2%  
Silver 17.189 0.014 0.1%  
Platinum 934.2 3.2 0.3%  
Palladium 958.8 -1.2 -0.1%  
  Average PM   0.1%  

 

SHFE Prices 06:33 BST

RMB

Change

% Change

Cu 53040 840 1.6%
AL  16370 -40 -0.2%
Zn 25775 -360 -1.4%
Pb 20660 -100 -0.5%
Ni 89760 1950 2.2%
Sn 145150 -1330 -0.9%
Average change (base metals) 0.1%
Rebar 3574 7 0.2%
Au 277.2 0.70 0.3%
Ag 3906 7 0.2%
Iron Ore (DCE) Jan’18 430 -10 -2.3%

 

Economic Agenda
BST Country Data Actual Expected Previous
12:01am UK RICS House Price Balance 6.0% 4.0% 6.0%
12:50am Japan Bank Lending y/y 3.0% 2.6% 3.2%
12:50am Japan PPI y/y 3.0% 3.0% 2.9%
5:30am Japan Tertiary Industry Activity m/m -0.2% 0.1% 0.1%
 7:45am France French Final CPI m/m -0.1% -0.1%
9:30am UK BOE Credit Conditions Survey  
10:00am EU  Industrial Production m/m 0.6% 0.1%
1:30pm US  PPI m/m 0.4% 0.2%
1:30pm US  Unemployment Claims 251K 260K
1:30pm US  Core PPI m/m 0.2% 0.1%
3:30pm EU  ECB President Draghi Speaks  
3:30pm US  FOMC Member Brainard Speaks  
3:30pm US  FOMC Member Powell Speaks  
3:30pm US  Natural Gas Storage 74B 42B
4:00pm US  Crude Oil Inventories   -1.9M -6.0M