Metals were mixed yesterday with lead, zinc and tin dropping between 2.7 percent for lead and one percent for tin, copper was off 0.3 percent at $4,767, while aluminium and nickel closed up 0.5 percent. Precious metals were firmer yesterday as they closed after the FOMC decision and statement, silver closed up three percent at $19.80, platinum closed up 1.9 percent at $1,048, gold closed up 1.3 percent at $1,332.70, while palladium was little changed at $680.
The Fed left interest rates unchanged, but left the door very open for a rise this year, there were, however, three FOMC members who dissented from the statement, which means the board is split.
This morning, all the base metals are firmer by an average of 1.1 percent, with gains fairly well grouped between 0.8 percent for copper at $4,803 and 1.4 percent for zinc. What is also interesting is that volumes have picked up, with 6,999 lots traded as of 05:57 BST and volume has become more wide spread across copper, aluminium, nickel and zinc, see table below.
The precious metals reacted to the FOMC news last night so bullion prices are consolidating with gold and silver prices little changed, while palladium has played catch-up with a 0.8 percent gain to $685.60 and platinum is up 0.3 percent.
In Shanghai, lead and zinc are weaker by around 0.3 percent, the rest are stronger, led by 1.7 percent gains in aluminium and nickel, tin is up 1.3 percent and copper is up 0.5 percent at Rmb 37,530. Spot copper is up 0.9 percent at Rmb 37,540-37,740, the backwardation is at an equivalent of around $30 per tonne, while the LME/Shanghai copper arb ratio at 7.81, which means the arb window is shut.
In other metals in China, iron ore prices are up strongly with gains of 4.1 percent on the Dalian Exchange, steel rebar is up 2.2 percent, silver is up 2.3 percent and gold prices are up one percent. In international markets, Brent crude is up 0.5 percent at $47.26.
Equities were firmer yesterday with the Euro Stoxx 50 up 0.5 percent, the Dow closed up 0.9 percent and Asia is relieved that the Fed was not outwardly hawkish. The Nikkei is up 1.9 percent, the Hang Seng is up 0.9 percent, as is the CSI 300, while the ASX 200 is up one percent and Kospi is up 1.1 percent.
In FX, the dollar fell with the dollar index at 95.39 after yesterday’s peak of 96.32, which was seen in the aftermath of the Bank of Japan’s policy changes. The euro is firmer at 1.1202, sterling is rebounding from lows, last at 1.3052, the yen is strong at 100.20 and the aussie is strong at 0.7641. In emerging market currencies, the yuan is flat at 6.6685, most of the others are steady to stronger, with the rand and real, seeing particular strength.
On the economic agenda today is a UK financial policy committee statement, data on UK industrial order expectations, US initial jobless claims, US house prices index, EU consumer confidence, US exisiting home sales, CB leading indicators and natural gas storage. There are also numerous central bank speakers, included ECB President Mario Draghi, Bank of England Governor Mark Carney and UK MPC members Jon Cunliffe and Kristin Forbes – see table below for more details.
Our stance on the base metals is that after the consolidations/corrections since the August highs, prices are heading higher again in line with the underlying trends. The higher prices levels are attracting more scale-selling, which is having to be absorbed but for now the path of least resistance is to the upside. Market sentiment seems still not that bullish, if anything it seems bearish, but the grind higher continues, which supports our overall mildly bullish outlook.
Gold prices had been looking vulnerable as support was being tested, but a dovish Fed has again provided lift, silver is looking even stronger – the gold/silver ratio is falling and the PGMs are on the rise. With wage talks stalled in South Africa and with platinum prices having corrected in recent weeks, a recovery in prices would not be surprising.
|SHFE Prices 05:58 BST||RMB||Change||% Change|
|Average change (base metals)||0||0.8%|
ECB Economic Bulletin
CBI Industrial Order Expectations
ECB President Draghi Speaks
MPC Member Cunliffe Speaks
Existing Home Sales
CB Leading Index m/m
Natural Gas Storage
BOE Gov Carney Speaks
MPC Member Forbes Speaks