Rallies pause after data-fuelled rally

The base metals generally built on Friday’s gains yesterday with prices up an average of 1.1 percent, tin led the way with a 2.3 percent rise to $16,900, nickel was up 1.6 percent, zinc is up 1.5 percent, while copper was off 0.1 percent at $4,676. Precious metals were mixed yesterday, gold prices ended little changed at $1,245, silver was up 0.5 percent at $16.45, palladium was up 0.2 percent, while platinum closed down 0.9 percent.

This morning, the metals are consolidating recent moves, zinc is off 0.5 percent, aluminium is off 0.4 percent, lead and tin are off 0.2 percent while nickel and copper are up 0.1 percent with copper at $4,680. Volume has been average with 6,029 lots traded as of 05:55 BST.

The precious metals are mixed, but little changed with gold and silver prices off 0.1 percent and the PGMs up 0.2 percent.

In Shanghai, nickel and tin are up around 0.5 percent, aluminium is off 1.6 percent – it has been consistently weak in recent days, while copper, lead and zinc are off around 0.4 percent with copper at Rmb 35,940. Spot copper in Changjiang, is down 0.2 percent at Rmb 36,080-36,280, the backwardation with the futures is at an equivalent of $50 per tonne, while the LME/Shanghai copper arb ratio is at 7.68.

In other metals in China, iron ore prices traded at $51.11 yesterday, steel rebar this morning is up 2.3 percent, gold prices are up 0.5 percent and silver is up 0.4 percent. In international markets, Brent crude oil is at $50.42.

Equities were buoyant yesterday in the aftermath of the US payrolls data on Friday with the Euro Stoxx 50 up 0.2 percent and the Dow closed up 0.6 percent. Asia is bullish too with the Nikkei up 0.6 percent, the Hang Seng is up 0.9 percent, the CSI 300 and ASX200 are down around 0.1 percent while the Kospi is up 1.1 percent.

In FX, the dollar is consolidating recent losses with the index at 94. The euro is consolidating in high ground at 1.1357, sterling is mid-range at 1.4517 (it spiked up to 1.4655 in the early hours), the yen is last at 107.73, while the aussie is rallying, last at 0.7428. The yuan is weakening again, last at 6.5742, the rouble is flat, while the other emerging market (EM) currencies are still strengthening after the Friday’s US data, which suggests we may be entering another risk-on mode.

On the economic calendar, the market is likely to focus on German industrial production, EU revised GDP and the US data that includes: revised nonfarm productivity and unit labor costs, IBD/TIPP economic optimism and consumer credit – see table below for more details.

The rallies in the base metals are losing some ground this morning after what seemed like knee-jerk reactions to the poor US data. For the likes of zinc, lead and tin that were rallying ahead of the data release, some consolidation is overdue, but for the others a pull-back already would look suspect. There is some strength in other commodities, with iron ore, steel and oil, all looking firmer and EM currencies are strengthening, so there appears to be some risk-on, so it may be that the base metals are just pausing to consolidate before heading higher. Should the rallies stall though, then that would suggest they may indeed be waiting for more positive news, especially out of China, before they are ready to resume their upward trends. In a way, it is ironic that the metals are firmer on bad data, especially as the data could be a warning that the US is slowing down too.

Yesterday’s limited follow through buying in the precious metals after the surges on Friday looks ominous. Some weakness is showing up in early trading, so we wait to see if this is consolidation, or whether the rallies have given the still extended fund longs another opportunity to take profits. We would be wary of the PGMs as there are wage negotiations taking place between South African unions and platinum producers.

 

Overnight Performance      
BST 05:55 +/- +/- % Lots
Cu 4680 3.5 0.1% 1789
Al 1549 -6 -0.4% 1958
Ni 8655 5 0.1% 649
Zn 2019 -9.5 -0.5% 1564
Pb 1729.5 -4 -0.2% 64
Sn 16865 -35 -0.2% 5
  Average   -0.2%         6,029
Gold 1243.8 -1.2 -0.1%  
Silver 16.43 -0.02 -0.1%  
Platinum 990.5 1.5 0.2%  
Palladium 554.1 1.1 0.2%  
  Average PM   0.0%  

 

SHFE Prices 06:02 BST RMB Change % Change
Cu 35940 -140 -0.4%
AL  11670 -195 -1.6%
Zn 15700 -40 -0.3%
Pb 12755 -45 -0.4%
Ni 68790 370 0.5%
Sn 109390 480 0.4%
Average change (base metals) 236.5   -0.3%
Rebar 2078 47 2.3%
Au 265 1.2 0.5%
Ag 3679 15 0.4%

 

Economic Agenda
BST Country Data Actual Expected Previous
12:01am UK
BRC Retail Sales Monitor y/y
0.5%   -0.9%
4:45am Japan
30-y Bond Auction
0.31|3.4   0.32|3.0
6:00am Japan
Leading Indicators
100.5% 100.8% 99.3%
 7:00am Germany
German Industrial Production m/m
  0.8% -1.3%
7:45am France
French Gov Budget Balance
    -27.5B
7:45am France
French Trade Balance
  -4.2B -4.4B
8:30am UK
Halifax HPI m/m
  0.3% -0.8%
10:00am EU 
Revised GDP q/q
  0.5% 0.5%
Tentative UK
30-y Bond Auction
    2.35|2.1
1:30pm US 
Revised Nonfarm Productivity q/q
  -0.6% -1.0%
1:30pm US 
Revised Unit Labor Costs q/q
  4.0% 4.1%
3:00pm US 
IBD/TIPP Economic Optimism
  49.1 48.7
8:00pm US 
Consumer Credit m/m
  19.1B 29.7B