Metals hold firm ahead of US employment report

The base metals put in a mixed performance on Thursday with zinc running higher to $2,004, while aluminium dropped two percent and the rest consolidated. At the close the base metals were down an average of 0.3 percent, with zinc giving back some earlier gains to finish the day at $1,977.50. Precious metals were weaker, off an average of 1.1 percent, with palladium off 2.9 percent at $530, while gold prices closed down 0.6 percent at $1,208.

This morning the market is poised for the US employment report, which may well determine the timing of the next Fed rate rise. The base metals are consolidating, they are generally firmer, although zinc is off 0.4 percent at $1,969 as it absorbs some scale up selling, the rest are up around 0.3 percent, volume has been below average with 3,974 lots traded.

The precious metals are firmer this morning, up an average of 0.6 percent, led by a 1.2 percent rebound in palladium, while gold prices are up 0.2 percent at $1,211, silver is up 0.4 percent and platinum is up 0.6 percent  

In Shanghai, the metals are mixed copper is up 0.4 percent at Rmb 35,430, aluminium is off 1.5 percent, nickel and tin are little changed and zinc and lead are off 0.3 and 0.6 percent respectively. Spot copper in Changjiang is up 0.3 percent at Rmb 35,550-35,650, the backwardation between spot and the July contract is the equivalent of $33 per tonne, while the LME/Shanghai copper arb ratio is 7.67.

In other metals in China, iron ore prices continue to retreat, prices dropped 2.8 percent to $47.90 yesterday, this morning steel rebar is up 1.2 percent, and gold and silver prices are little changed. Internationally priced Brent crude is up 0.4 percent at $50.07. It is somewhat surprising that the stronger oil prices are not giving metal prices as much lift as they did during the March/Aprilrallies.

Equities were mixed yesterday with the Euro Stoxx 50 off 0.2 percent, while the Dow closed up 0.3 percent. In Asia this morning, the Nikkei is up 0.4 percent, the CSI 300 is up 0.6 percent, the Hang Seng is up 0.3 percent, the ASX200 is up 0.7 percent and the Kospi is little changed. Equities do not seem too fearful that a rate rise will be seen in June – the latest indication is there is a 21 percent chance of a 25 basis point rise at the June FOMC meeting.

In FX, the dollar index is treading water in high ground, last at 95.56, the euro is weak at 1.1148, as is sterling at 1.4412, the aussie is consolidating at 0.7242, while the yen is slightly firmer at 108.76. In emerging market currencies the yuan is holding in low ground at 6.5892, the ringgit remains weak, while the rest are consolidating within recent ranges.

It is a busy day on the data front with services PMI data out across the globe, followed by the US employment report that is expected to have seen 159,000 jobs created in May. In addition, there is EU retail sales, the US trade balance and US factory orders. FOMC member Lael Brainard is also speaking at 5:30 BST – see table below for more details.

The base metals, with the exception of zinc, are consolidating after their May sell-offs. They seem to have found some bargain hunting, but there is little appetite to push them higher given the lacklustre-to-weak data, especially out of China. With the uncertainty of the Fed rate rise and the Brexit vote, it is not so surprising that consolidation dominates. As such, the markets remain vulnerable.  Given the other metals did not follow zinc higher, zinc prices may struggle to go it alone, but they may well have flagged their intension.

The precious metals are still consolidating as they absorb selling from profit-taking and there may well be more room on the downside, especially if today’s data is stronger than expected, but we also do expect the lower prices to attract pent-up physical demand back into the market, which should be bullish for gold prices in the medium term.


Overnight Performance      
BST 06:34 +/- +/- % Lots
Cu 4616 19 0.4% 1017
Al 1544.5 5 0.3% 1188
Ni 8450 40 0.5% 569
Zn 1969 -8.5 -0.4% 1142
Pb 1710 5.5 0.3% 51
Sn 16275 35 0.2% 7
  Average   0.2%         3,974
Gold 1211 3 0.2%  
Silver 16.01 0.06 0.4%  
Platinum 958.3 5.3 0.6%  
Palladium 536.2 6.2 1.2%  
  Average PM   0.6%  


SHFE Prices 06:34 BST RMB Change % Change
Cu 35430 150 0.4%
AL  11880 -185 -1.5%
Zn 15395 -50 -0.3%
Pb 12710 -80 -0.6%
Ni 67450 -10 0.0%
Sn 107480 30 0.0%
Average change (base metals) 236.5   -0.3%
Rebar 1982 23 1.2%
Au 258.4 -0.25 -0.1%
Ag 3588 3 0.1%


Economic Agenda
BST Country Data Actual Expected Previous
1:00am Japan
Average Cash Earnings y/y
0.3% 0.9% 1.5%
2:45am China
Caixin Services PMI
51.2 52 51.8
 8:15am Spain
Spanish Services PMI
  55.6 55.1
8:45am Italy
Italian Services PMI
  52.3 52.1
8:50am France
French Final Services PMI
  51.8 51.8
8:55am Germany
German Final Services PMI
  55.2 55.2
9:00am EU 
Final Services PMI
  53.1 53.1
9:30am UK
Services PMI
  52.5 52.3
10:00am EU 
Retail Sales m/m
  0.4% -0.5%
1:30pm US 
Average Hourly Earnings m/m
  0.2% 0.3%
1:30pm US 
Non-Farm Employment Change
  159K 160K
1:30pm US 
Unemployment Rate
  4.9% 5.0%
1:30pm US 
Trade Balance
  -41.2B -40.4B
2:45pm US 
Final Services PMI
  51.2 51.2
3:00pm US 
ISM Non-Manufacturing PMI
  55.4 55.7
3:00pm US 
Factory Orders m/m
  1.8% 1.1%
5:30pm US 
FOMC Member Brainard Speaks