Base metals surge as market adjusts to Trump’s win

The base metals reversed yesterday’s early weakness with most of the metals closing with solid gains. Three-month prices ended the day up an average of 1.8 percent, nickel surged 3.9 percent to $11,655 per tonne and copper prices closed up 3.3 percent at $5,420.50 per tonne, tin prices were little changed. Gold prices had shot higher initially yesterday, but they gave back most of their gains to close up 0.2 percent at $1,275.85 per oz, basis spot. Silver prices closed up 0.5 percent, platinum prices dropped 0.8 percent and palladium climbed 1.4 percent.

This morning, the base metals are up strongly again with average gains of 1.7 percent across the three-month prices. Copper prices are up 3.2 percent at $5,595 per tonne, tin and zinc prices are up 1.9 percent, while the rest are up between 0.8 percent for aluminium prices and 1.3 for nickel prices. Volume has once again been very high with 25,259 lots traded – indeed this week has seen volume explode, it has averaged 22,021 lots around this time of day, compared with an average of 7,603 lots last week.

Precious metals are mixed this morning, spot gold prices are up 0.8 percent at $1,286.16 per oz, silver prices are up 1.3 percent, platinum is up 0.1 percent and palladium is up 1.2 percent.

In Shanghai, the January base metals prices are up an average of 4.4 percent, led by six percent gains in copper (Rmb 43,910 per tonne) and nickel prices, zinc prices are up 4.3 percent, aluminium prices are up 4 percent, lead was up 3.5 percent and tin is up 2.3 percent. Spot copper prices in Changjiang are up 7.7 percent at Rmb 45,000-45,150 per tonne, the backwardation has surged to an equivalent of $183 per tonne – this suggests restocking of physical metal, while the LME/Shanghai copper arb ratio has widened to 1:7.84 – implying the arb window is open.

January iron ore prices on the Dalian Commodity Exchange are up a massive 8.9 percent. Dollar based seaborne iron ore prices were up 5 percent, trading at $70.98 per tonne. On SHFE steel rebar prices are up 0.4 percent, gold prices are off 0.8 percent and silver prices are off 0.4 percent. In international markets, Brent crude oil prices are up 0.5 percent at $46.70 per barrel.  

Equities recovered from their sharp pre-market weakness yesterday to close up – the Euro Stoxx closed up 1.1 percent and the Dow closed up 1.4 percent and Asia has followed suit with the Nikkei up 6.7 percent, the Hang Seng is up 2.1 percent, the Kospi is up 2.3 percent, the CSI 300 is up 1.1 percent and the ASX 200 is up 3.3 percent.

In FX, the dollar index plunged to a low of 95.88 yesterday, before closing at 98.70, it was recently quoted at 98.43. The euro spiked up to 1.1299 yesterday, it closed at 1.0918 and was recently at 1.0940. Sterling has been less volatile, it was recently quoted at 1.2414, the aussie is mid-range at 0.7677 and the yen has had a volatile time, trading a range between 105.90 and 101.19 yesterday, but was recently quoted at 105.27. The yuan is weak at 6.7009 and the emerging market currencies we follow are mixed, the Mexican peso remains weak at 19.8080, the ringgit is weaker at 4.2553 and the rest are consolidating off recent highs.

Data out today includes French and Italian industrial production, French non-farm payrolls, with US data including initial jobless claims, natural gas storage and the federal budget balance. FOMC member James Bullard is also speaking – see table below for more details.

The metals have soared on the prospects for more infrastructure spending in the US and also because having a businessman running the US may be good for business. Ahead of the election results, metals prices were already pushing ahead, so the election surprise has just given fuel to the rally – prices are now in danger of running ahead of the fundamentals. Three-month copper prices have rallied $978.50 per tonne, some 21 percent, in thirteen days. We would expect consolidation at lower numbers before too long.  

Gold gave back its gains but is still rising off the early October base. The prospects for a pick-up in inflation, combined with considerable uncertainty may well see the dip in gold prices short-lived. Silver, platinum and palladium seem to be acting more as industrial precious metals. 

 

Overnight Performance
GMT 06:30 +/- +/- % Lots
Cu 5595 174.5 3.2% 8023
Al 1768 14 0.8% 5205
Ni 11810 155 1.3% 5870
Zn 2558 47.5 1.9% 5470
Pb 2166 20.5 1.0% 5469
Sn 21750 405 1.9% 634
  Average   1.7%       25,259
Gold 1286.16 10.31 0.8%  
Silver 18.662 0.247 1.3%  
Platinum 991.8 0.8 0.1%  
Palladium 678.8 7.8 1.2%  
  Average PM   0.8%  

 

SHFE Prices 06:30 GMT RMB Change % Change
Cu 43910 2480 6.0%
AL  14060 540 4.0%
Zn 20865 865 4.3%
Pb 17390 595 3.5%
Ni 95600 5410 6.0%
Sn 154180 3410 2.3%
Average change (base metals) 0   4.4%
Rebar 3007 12 0.4%
Au 282.75 -2.25 -0.8%
Ag 4263 -18 -0.4%

 

Economic Agenda
GMT Country Data Actual Expected Previous
12:01am UK
RICS House Price Balance
23.0% 19.0% 17.0%
3:45am Japan
30-y Bond Auction
0.51|3.5   0.51|3.6
6:00am Japan
Prelim Machine Tool Orders y/y
-8.9%   -6.3%
 7:45am France
Industrial Production m/m
  0.3% 2.1%
 7:45am France
Prelim Non-Farm Payrolls q/q
  0.2% 0.2%
9:00am Italy
Industrial Production m/m
  -1.0% 1.7%
1:30pm US 
Unemployment Claims
  260K 265K
2:15pm US 
FOMC Member Bullard Speaks
     
3:30pm US 
Natural Gas Storage
  53B 54B
6:01pm US 
30-y Bond Auction
    2.47|2.4
7:00pm US 
Federal Budget Balance
  -81.0B 33.4B
11:50pm JPY
PPI y/y
  -2.6% -3.2%