Metals continue to show strength

The base metals closed on a strong note on Friday, October 28, with gains averaging one percent basis three-month prices. Zinc prices led the rise with a 1.7 percent gain, aluminium and copper prices were up 1.4 and 1.2 percent respectively. Precious metals were also firmer on Friday, with spot prices up an average of 1.4 percent, led by a 1.5 percent rebound in palladium prices to $618 per oz. Gold prices closed up 1.2 percent at $1,283.95 per oz – further concerns about the US Election have added to political uncertainty, giving gold prices a boost in the process.

This morning, the base metals are up an average of 0.2 percent, basis three-month prices, most of the metals are firmer, the exception is copper that is down 0.4 percent at $4,825 per tonne. Nickel prices are up 0.7 percent at $10,450 per tonne, zinc and tin prices are up 0.4 percent, while aluminium and lead prices are little changed.

In Shanghai, the base metals are up across the board with December aluminium prices up 2.6 percent at Rmb 14,150 per tonne, December zinc prices are up 1.6 percent, January nickel prices up one percent and December copper prices are up 0.7 percent at Rmb 38,400 per tonne. Spot copper prices in Changjiang are also up 0.7 percent at Rmb 38,500-38,700 per tonne, the backwardation between spot and the December contract is at an equivalent of $44 per tonne and the LME/Shanghai copper arbitrage ratio has fallen to 1:7.96, which means the arb window is probably not open to most trading.

In other metals in China, January iron ore prices on the Dalian Commodity Exchange are up 3.3 percent, January steel rebar on SHFE is up 2.3 percent, while December gold and silver prices are up 0.6 and 0.7 percent respectively. In international markets, spot Brent crude oil prices are down 0.5 percent at $50.42 per barrel.

Equities were generally weaker on Friday, the Euro Stoxx 50 closed down 0.2 percent while the Dow closed off 0.1 percent and the S&P 500 closed off 0.3 percent. In Asia this morning, markets are mixed, the Nikkei is off 0.1 percent, the Hang Seng is up 0.2 percent, the CSI 300 is down 0.2 percent, the ASX 200 is up 0.6 percent, helped by stronger commodity prices, and the Kospi is down 0.6 percent.

In FX, the dollar has slipped on the back of the latest FBI Clinton probe with the dollar index falling to 98.50 from a peak last week of 99.12. The euro jumped to 1.0991 on Friday, but is recent quoted at 1.0958, while other currencies are little changed with sterling at 1.2176, the yen at 104.87 and the aussie at 0.7601. The yuan has firmed from Friday, it is recent quoted at 6.7698, Friday’s low was 6.7869. Other emerging market currencies are mixed, the rouble is weaker at 63.20 on the back of the weaker oil and the rand is firmer on the back of firmer commodity prices.

The economic agenda is busy today, data out already showed Japan’s housing starts jumped ten percent, having been expected to climb 5.3 percent, German retail sales dropped 1.4 percent, data out later includes UK lending data, EU and Italian CPI, EU flash GDP and US data includes personal income, spending and PCE prices and Chicago PMI – see table below for more details.

The base metals are all looking strong and well placed to continue higher. Aluminium and tin prices are pushing the envelope on the upside, zinc prices look well placed to follow, copper and nickel prices are approaching resistance lines and lead is consolidating. With the metals’ industry gathering in London for London Metals Week, it will be interesting to see whether sentiment is getting more bullish or not. We remain quietly bullish, but sentiment generally seems considerably less bullish than the price performance.

Gold prices have pushed higher on the back of increased uncertainty over the US election but prices are still generally in consolidation mode in that they could be forming bear-flags. That said, ETF buying has picked up in recent weeks and if the dollar retreats further then more buying could emerge. Platinum prices are rebounding from oversold levels, while palladium prices are at best consolidating. Given the strength in other industrial metals we would not be surprised to see the industrial precious metals get some support. 

 

Overnight Performance
GMT 06:45 +/- +/- % Lots
Cu 4825 -20.5 -0.4% 3197
Al 1715.5 0 0.0% 1760
Ni 10450 70 0.7% 1027
Zn 2409 10.5 0.4% 2051
Pb 2069 1 0.0% 205
Sn 20650 90 0.4% 8
  Average   0.2%         8,248
Gold 1275.89 -8.06 -0.6%  
Silver 17.852 0.107 0.6%  
Platinum 979 1 0.1%  
Palladium 620.8 2.8 0.5%  
  Average PM   0.1%  

 

 

SHFE Prices 06:50 GMT RMB Change % Change
Cu 38400 270 0.7%
AL  14150 355 2.6%
Zn 19320 310 1.6%
Pb 16440 80 0.5%
Ni 83020 830 1.0%
Sn 134540 180 0.1%
Average change (base metals) 0   1.1%
Rebar 2604 59 2.3%
Au 280.05 1.6 0.6%
Ag 4088 27 0.7%

 

Economic Agenda
BST Country Data Actual Expected Previous
5:00am Japan
Housing Starts y/y
10.0% 5.3% 2.5%
7:00am Germany
Retail Sales m/m
-1.4% 0.2% -0.3%
 9:30am UK
Net Lending to Individuals m/m
  4.6B 4.5B
 9:30am UK
M4 Money Supply m/m
  0.6% 0.9%
 9:30am UK
Mortgage Approvals
  62K 60K
10:00am EU 
CPI Flash Estimate y/y
  0.5% 0.4%
10:00am EU
Core CPI Flash Estimate y/y
  0.8% 0.8%
10:00am EU
Prelim Flash GDP q/q
  0.3% 0.3%
10:00am Italy
Prelim CPI m/m
  0.2% -0.2%
12:30pm US 
Core PCE Price Index m/m
  0.1% 0.2%
12:30pm US 
Personal Spending m/m
  0.4% 0.0%
12:30pm US 
Personal Income m/m
  0.4% 0.2%
1:45pm US 
Chicago PMI
  54 54.2