Metals looking strong and well placed to push higher

Metals got back into bullish mode on Thursday with average gains of 1.7 percent, led by a 3.2 percent rally in nickel to $10,655, aluminium was up 3.1 percent to $1,630, copper was up 1.6 percent at $4,845, zinc was up one percent and lead and tin were up 0.8 percent. Palladium led the precious metals higher yesterday with a 1.5 percent gain to $690, while gold, silver and platinum were up 0.3 percent. The general sentiment amongst many traders is that they are not bullish for the base metals, citing the subdued physical markets, but we have tended to be more bullish on underlying growth in China and the likelihood that restocking is underway after a few years of destocking.

This morning the metals are mixed with nickel off 1.1 percent to $10,535, lead is down 0.5 percent and copper is off 0.2 percent at $4,833, aluminium is up 0.2 percent, zinc is up one percent and tin is up 0.4 percent. Volume has been average, but once again the volume has been quite evenly spread across the main contracts, with more aluminium and nickel traded than copper.

Precious metals are mixed, the PGMs are firmer led by a 0.6 percent gain in platinum to $1,057.80, while bullion prices are slightly easier with gold prices last at $1,335.08.

In Shanghai, the base metals are up an average of 0.5 percent, lead bucks the trend with a 0.4 percent fall, while aluminium leads on the upside with a 1.6 percent gain and copper is up 0.5 percent at Rmb 37,660. Spot copper in Changjiang is up 0.4 percent at Rmb 37,780-37,900, the spread with the November contract is at an equivalent of $35 per tonne and the LME/Shanghai copper arb ratio is weaker at 7.81, meaning the arb window is closed.

In other metals in China, iron ore prices are up 0.1 percent, steel rebar is up 0.2 percent,  gold prices are up 0.3 percent and silver is off 0.2 percent. In international markets, Brent crude is off 0.4 percent at $47.23.

Equities were strong in Europe yesterday with a 2.3 percent gain in the Euro Stoxx 50, the Dow closed up 0.5 percent. Asia this morning is mixed the Nikkei and Hang Seng are off 0.2 percent and the CSI 300 is off 0.3 percent, but the ASX 200 is up one percent and the Kospi is up 0.1 percent.

In FX, the dollar index is consolidating around 95.50 after the gyrations seen after the Bank of Japan and FOMC meetings. The euro is mid-range at 1.1200, sterling is weak at 1.3040, the yen is drifting again, last at 100.91, while the aussie is firmer at 0.7637. In emerging market currencies, the yuan is flat at 6.6730, and the others we follow are consolidating after a period of strength.

Data out today is focused on flash PMI data. Japan’s manufacturing PMI climbed to 50.3 from 49.5, the country’s all industries activity climbed 0.3 percent. Later we get flash manufacturing and services PMI in France, Germany and the EU, plus manufacturing PMI in the US – see table below for more details.

The base metals are looking strong with copper moving out of its mini-bull flag yesterday to start another up leg, the resistance line joining the peaks since March is up around the $4,905 level, aluminium, nickel and tin have been showing particular strength while zinc is steady and lead’s recent show of strength appears to have run into selling. We remain mildly bullish, any further sign of strength in PMI data could help underpin the markets, but the next main focus is likely to be on China’s PMI in early October.

Gold prices got some lift off support following the FOMC statement, we wait to see if it has the energy to tackle the resistance line linking the peaks seen since the July high – the line is at $1,350. Silver prices are already challenging its resistance line, as are platinum and palladium prices. As such, the precious metals are looking strong.

 

Overnight Performance
BST 06:29 +/- +/- % Lots
Cu 4833 -12 -0.2% 1088
Al 1632.5 2.5 0.2% 1473
Ni 10535 -120 -1.1% 1264
Zn 2286.5 1.5 0.1% 994
Pb 1937.5 -9 -0.5% 222
Sn 19510 85 0.4% 6
  Average   -0.2%         5,047
Gold 1335.08 -1.92 -0.1%  
Silver 19.795 -0.065 -0.3%  
Platinum 1057.8 6.8 0.6%  
Palladium 691.5 1.5 0.2%  
  Average PM   0.1%  

 

SHFE Prices 06:29 BST RMB Change % Change
Cu 37660 170 0.5%
AL  12445 195 1.6%
Zn 17905 5 0.0%
Pb 14475 -55 -0.4%
Ni 81980 460 0.6%
Sn 126570 1260 1.0%
Average change (base metals) 0   0.5%
Rebar 2296 4 0.2%
Au 288.05 0.85 0.3%
Ag 4387 -10 -0.2%

 

Economic Agenda
BST Country Data Actual Expected Previous
1:30am Japan
Flash Manufacturing PMI
50.3 49.3 49.5
5:30am Japan
All Industries Activity m/m
0.3% 0.2% 1.0%
 8:00am France
French Flash Manufacturing PMI
  48.4 48.3
 8:00am France
French Flash Services PMI
  52 52.3
8:30am Germany
German Flash Manufacturing PMI
  53.2 53.6
8:30am Germany
German Flash Services PMI
  52.2 51.7
9:00am EU 
Flash Manufacturing PMI
  51.5 51.7
9:00am EU
Flash Services PMI
  52.8 52.8
2:45pm US 
Flash Manufacturing PMI
  52.1 52