Metals morning view: Metals consolidate ahead of Lunar New Year holiday

Base metals on the London Metal Exchange are for the most part consolidating this morning, Wednesday February 14. Nickel prices are the most energetic with a 0.7% gain to $13,520 per tonne, the others are ranged between down 0.2% and up 0.3%, with copper prices unchanged at $7,017 per tonne.

Volume has been below average, with 7,611 lots traded as of 07.19 am London time.

This follows a second day of strength, with prices closing up by an average of 1.8% on Tuesday.

The precious metals are also firmer this morning with gains averaging 0.3%. Spot gold prices are up by 0.2% at $1,333.95 per oz. This follows gains of 0.7% yesterday.

On the Shanghai Futures Exchange, the base metals are up by an average of 2%, with aluminium prices bucking the trend with a 1.8% fall. LME aluminium prices managed to shake off the 166,225 tonnes of stock inflow yesterday, but it appears to have weighed on aluminium sentiment in China. Copper prices are up 1.6% at 52,710 yuan ($8,313) per tonne, while spot copper prices in Changjiang are up by 1.0% at 51,990-52,150 yuan per tonne and the LME/Shanghai copper arbitrage ratio has eased to 7.51, down from 7.54 on Tuesday.

In other metals in China, iron ore prices are up by 2.6% at 539.50 yuan per tonne on the Dalian Commodity Exchange. On the SHFE, steel rebar prices are up by 0.3%, gold prices are up by 0.9% and silver prices are up by 0.4%.

In wider markets, spot Brent crude oil prices are rebounding, up by 0.13% at $62.63 per barrel, while the yield on US 10-year treasuries is easier at 2.83%, as is the German 10-year bund yield at 0.73%.

Equities in Asia are mixed today: the Kospi is up 1.11%, the CSI 300 is up 0.80%, and the Hang Seng is up 1.71%, while the ASX 200 is down 0.25% and the Nikkei is down 0.43%. The latter is under pressure as the yen surges. This follows a mixed performance in western markets on Tuesday, where in the United States the Dow Jones closed up by 0.16% at 24,640.45, and in Europe where the Euro Stoxx 50 closed down by 0.81% at 3,340.93.

The dollar index is edging lower again, it was recently quoted at 89.59, the low being 88.43 on January 25 and the recent high being 90.57 on February 9. The euro (1.2365) is working higher, as are sterling (1.3895) and the Australian dollar (0.7872), while the yen (107.44) reached 106.84 earlier today, which was the highest since November 14. The yuan at 6.3420 is slightly weaker, while most of the other emerging currencies we follow are mixed.

The economic calendar shows China’s foreign direct investment only grew 0.3%, but this follows two months of extra strong gains of 7.9% and 9.8%, which were well above average for 2017. German fourth quarter GDP was up 0.6%, weaker than the 0.8% seen in the third quarter, and CPI dropped 0.7%, but it has a history of being negative in January. Later there is data out on Italian and EU GDP, EU industrial production with US data including CPI, retail sales, business inventories and crude oil inventories. In addition, Germany’s Bundesbank president Jens Weidmann is speaking.

After two days of rebounds LME prices are consolidating. While it does look as though the shake-out from last week may have run its course driven by dip buying, the strength of the yen suggests a pick-up in haven buying so there may still be further bouts of weakness in the broader markets that could weigh on sentiment in the metals. In addition, traders may be nervous about thinner market volumes during China’s Lunar New Year holiday that starts on Thursday and runs until February 21. We still think underlying sentiment is bullish – we should get an update on how bullish it is by seeing how much follow-through buying there is. But, it may take until after the Lunar New Year holidays before bullishness returns.

Precious metals are mapping out a similar path to the base metals i.e. they have rebounded off last week’s lows but are now consolidating. Given the yen is seeing some safe-haven demand may well help underpin/drive gold prices too.

 

Overnight Performance
GMT 07:19 +/- +/- % Lots
Cu 7,017 0.0 0.0% 2,531
Al 2,135 -5.0 -0.2% 1,847
Ni 13,520 95.0 0.7% 1,486
Zn 3,465 -4.0 -0.1% 1,258
Pb 2,559 8.0 0.3% 475
Sn 21,585 10.0 0.0% 14
Average BM   0.1%        7,611
Gold  1,333.95 2.25 0.2%  
Silver        16.62 0.01 0.1%
Platinum      977.90 4.90 0.5%
Palladium      989.00 3.00 0.3%
Average PM   0.3%

 

SHFE Prices 07:19 GMT RMB Change % Change
Cu      52,710           830 1.6%
AL      14,130 –         255 -1.8%
Zn      26,640           605 2.3%
Pb      19,330           355 1.9%
Ni   103,000        2,680 2.7%
Sn   148,770        1,920 1.3%
Average change (base metals) 1.3%
Rebar  3,929.00        11.00 0.3%
Au      276.05          2.55 0.9%
Ag  3,716.00        13.00 0.4%
Iron Ore (DCE) May’18 539.5 13.5 2.6%

 

Economic calendar
GMT Country Data Actual Expected Previous
3:28am China Foreign Direct Investment ytd/y 0.3% 7.9%
7:00am Germany German Prelim GDP q/q 0.6% 0.6% 0.8%
7:00am Germany German Final CPI m/m -0.7% -0.7% -0.7%
 8:00am Germany German Buba President Weidmann Speaks
9:00am Italian Italian Prelim GDP q/q 0.4% 0.4%
10:00am EU Flash GDP q/q 0.6% 0.6%
10:00am EU Industrial Production m/m 0.1% 1.0%
1:30pm US CPI m/m 0.3% 0.1%
1:30pm US Core CPI m/m 0.2% 0.3%
1:30pm US Core Retail Sales m/m 0.5% 0.4%
1:30pm US Retail Sales m/m 0.2% 0.4%
2:30pm UK CB Leading Index m/m -0.2%
3:00pm US Business Inventories m/m 0.3% 0.4%
3:30pm US Crude Oil Inventories 2.8M 1.9M