Metals mostly well placed to push higher as risk-on returns

The base metals were mixed yesterday with a generally firmer tone, led by a 1.5 percent rise in nickel to $10,020, copper was up 1.1 percent at $4,743, while aluminium and zinc were off around 0.4 percent, lead was up 0.3 percent and tin was little changed. Precious metals saw gold prices off 0.9 percent at $1,353.25, the rest were firmer with palladium up 1.1 percent, platinum was up 0.4 percent and silver was little changed.

This morning, the base metals are up an average of 0.4 percent, with most of the metals fairly tightly bunched with two exceptions, aluminium is off 0.2 percent and nickel is up 0.9 percent. Copper is last at $4,761.

Precious metals are mixed, gold prices are little changed at $1,354.38, silver is up 0.5 percent, platinum is off 0.4 percent and palladium is down one percent.

In Shanghai, aluminium is off 0.4 percent, the rest are up between 0.3 percent for lead and 1.8 percent for nickel, with copper prices up 0.6 percent at Rmb 37,020. Spot copper is up 0.2 percent at Rmb 36,940-37,140, the spread has reverted to a small backwardation equivalent to some $18 per tonne, while the LME/Shanghai copper arb ratio is at 7.78.

In other metals in China, iron ore prices on the Dalian Exchange rallied 4.2 percent this morning, apparently as a local government has given notice to steel mills in its region that it will need to restrict output for a period later in the year for help clear pollution. This has prompted a pick-up in steel making to build up stock ahead of the slowdown.  Steel rebar prices are up 4.1 percent. Despite higher steel prices that have spurred production, steel stocks are reported to be low. Gold prices are off 0.2 percent, while silver continues to rally, it is up 1.2 percent. In international markets, Brent crude oil is up 0.5 percent at $46.29.

Equities were upbeat yesterday, the Euro Stoxx 50 was up 1.7 percent and the Dow was up 0.4 percent – the S&P 500 climbed to a record high. This has flowed through to Asia, helped by anticipation of more stimulus from the Japanese government. The Nikkei is up 2.6 percent, the Hang Seng is up 0.7 percent, the ASX 200 is up 0.5 percent, the Kospi is up 0.2 percent and the CSI 300 is up 0.6 percent. All of which suggests risk-on is returning.

In FX – the dollar index remains around the 96 level, last 96.36, sterling is rebounding, last at 1.3073, as is the aussie at 0.7588, the euro is flat at 1.1081 and the yen is weaker at 103.04. In emerging market currencies, the yuan is low ground at 6.6850, the rand is firmer at 14.3700, while the rest consolidate.

The economic agenda is busy, data out already includes Japan’s PPI that fell 4.2 percent, tertiary industrial activity fell 0.7 percent, the strong yen probably not helping there, German CPI rose 0.1 percent, while PPI climbed 0.6 percent.  There is a host of UK monetary policy data out and in the US data includes small business index, job openings and wholesale inventories. FOMC members Daniel Tarullo and James Bullard are speaking too – see table below for more details.

The base metals are firm in generally high ground but seem to be hesitating to push higher, although nickel, tin and zinc are well placed to do so.  For now we still favour the upside, upbeat equity markets and a recovery in cable, while the yen weakens, all suggest that risk-on is returning.

In the precious metals, gold prices tried to push higher yesterday but ran into selling, as did silver and palladium, leaving only platinum to extend gains this morning to $1,105. With risk-on in other market, we would not be surprised to see gold prices run into profit-taking, given the large gross long fund position, profit-taking could be quite aggressive.


Overnight Performance 
BST 06:15 +/- +/- % Lots
Cu 4761 17.5 0.4% 745
Al 1648.5 -4 -0.2% 597
Ni 10115 95 0.9% 916
Zn 2145 8.5 0.4% 1178
Pb 1825 8 0.4% 29
Sn 17800 80 0.5% 6
  Average   0.4%         3,471
Gold 1354.38 1.13 0.1%  
Silver 20.342 0.107 0.5%  
Platinum 1094.4 -4.6 -0.4%  
Palladium 615.5 -6.5 -1.0%  
  Average PM   -0.2%  


SHFE Prices 06:15 BST RMB Change % Change
Cu 37020 220 0.6%
AL  12565 -50 -0.4%
Zn 16770 130 0.8%
Pb 13105 35 0.3%
Ni 79600 1400 1.8%
Sn 118350 1260 1.1%
Average change (base metals) 236.5   0.7%
Rebar 2522 100 4.1%
Au 293.75 -0.6 -0.2%
Ag 4517 54 1.2%


Economic Agenda
BST Country Data Actual Expected Previous
12:01am UK
BRC Retail Sales Monitor y/y
-0.5%   0.5%
12:50am Japan
PPI y/y
-4.2% -4.1% -4.3%
2:30am US 
FOMC Member Mester Speaks
4:45am Japan
30-y Bond Auction
0.12|2.6   0.31|3.4
5:30am Japan
Tertiary Industry Activity m/m
-0.7% -0.7% 0.7%
 7:00am Germany
German Final CPI m/m
0.1% 0.1% 0.1%
 7:00am Germany
German WPI m/m
0.6% 0.3% 0.9%
9:30am UK
FPC Meeting Minutes
10:00am UK
BOE Gov Carney Speaks
11:00am US 
NFIB Small Business Index
  94.1 93.8
12:00pm UK
BOE Quarterly Bulletin
2:15pm US 
FOMC Member Tarullo Speaks
2:35pm US 
FOMC Member Bullard Speaks
3:00pm US 
JOLTS Job Openings
  5.74M 5.79M
3:00pm US 
Wholesale Inventories m/m
  0.2% 0.6%
6:01pm US 
10-y Bond Auction