Some risk-on returns to copper, oil and broader markets

The base metals put in a mixed performance yesterday as some metals consolidated and other continued to correct. Tin led the falls with a 2.4 percent drop to $15,665, zinc was off 0.3 percent, lead and aluminium were unchanged, while copper was up 0.5 percent at $4,586.50 and nickel was up 0.8 percent. Precious metals fell further, down an average of 1.8 percent, led by a 3.3 fall in palladium, while gold prices were off 1.8 percent at 41,227.30 – we see the sell-off as profit-taking.

This morning the tone is brighter with the base metals all firmer with average gains of 0.4 percent, led by 0.9 percent rises in tin and copper, the latter is last at $4,628. Volume has been closer to average with 4,231 lots traded as of 06:22 BST. A rebound in oil prices, with Brent crude last at $49.17, seems to be lending some support.

Precious metals are also firmer this morning with gains of 0.4 percent, gold prices are little changed at $1,227.70, the industrial precious metals are up around 0.5 percent.

In Shanghai, the base metals are mixed with copper up 1.3 percent at Rmb 35,670, nickel is up 0.5 percent, aluminium is off 1.8 percent and zinc is off 0.5 percent, while lead and tin are little changed. Spot copper in Changjiang is up 1.1 percent at Rmb 35,520-35,720, a small back equivalent of $7 lies between spot copper and the July contracts, while the LME/Shanghai copper arb ratio is at 7.7.

In other metals in China, iron ore closed Tuesday at $51.36, steel rebar is little changed this morning, gold prices are down 1.3 percent and silver is off 0.2 percent.

Equities were stronger yesterday helped by better US housing data and stronger oil prices, the Euro Stoxx 50 closed up 2.6 percent, the Dow closed up 1.2 percent and Asia is brighter too with the Nikkei up 1.7 percent, the Hang Seng is up 2.5 percent, the CSI 300 is up 0.2 percent, the ASX 200 is up 1.6 percent and the Kospi is up 1.2 percent.

In FX – the dollar index is strong at 95.51, the euro is trending lower, last at 1.1153, sterling is rebounding at 1.4615, the aussie is rebounding off weakness, last at 0.7209, while the yen is looking weaker at 109.97. In emerging market (EM) currencies the yuan is weak at 6.5635, the rest are seeing some strength in an overall bearish market, which fits in with this morning’s apparent risk-on stance.

On the economic agenda are German GfK consumer climate, Ifo business climate, there is an Ecofin meeting and US data includes goods trade balance, house price index, flash services PMI and crude oil inventories. With oil inventories expected to fall, oil prices may get a further boost, which in turn could support commodities.

There seems to be some bargain hunting coming into copper, but the overall trends across the complex seems to be one of correcting, so we wait to see if a firmer oil and copper are enough to prompt bargain hunting in the rest. Equities and EM currencies seem to be signalling some risk-on appetite, so there may be some room on the upside for metals. 

The precious metals on the other hand are weak and a much expected bout of profit-taking seems to be in mid-flow. Given how extended the long fund positions in gold and silver had become, we would not be surprised to see prices fall further, but we think the weaker prices will attract bargain hunting. As such, it will be interesting to see how far gold prices do fall and how long they stay down for.  

 

Overnight Performance      
BST 06:22 +/- +/- % Lots
Cu 4628 41.5 0.9% 1908
Al 1555 2 0.1% 1011
Ni 8445 25 0.3% 807
Zn 1828 0.5 0.0% 836
Pb 1652 3 0.2% 69
Sn 15800 135 0.9% 11
  Average   0.4%         4,642
Gold 1227.7 0.4 0.0%  
Silver 16.292 0.097 0.6%  
Platinum 1001.9 4.9 0.5%  
Palladium 532.5 2.5 0.5%  
  Average PM   0.4%  

 

SHFE Prices 06:23 BST RMB Change % Change
Cu 35670 460 1.3%
AL  12060 -225 -1.8%
Zn 14560 -85 -0.6%
Pb 12670 15 0.1%
Ni 67320 330 0.5%
Sn 105100 -120 -0.1%
Average change (base metals) 236.5   -0.1%
Rebar 1940 -1 -0.1%
Au 261.05 -3.45 -1.3%
Ag 3633 -9 -0.2%

 

BST Country Data Actual Expected Previous
7:00am Germany
GfK German Consumer Climate
  9.7 9.7
9:00am Germany
German Ifo Business Climate
  106.9 106.6
Tentative Germany
German 30-y Bond Auction
    1.03|1.6
All Day EU 
ECOFIN Meetings
     
1:30pm US 
Goods Trade Balance
  -60.1B -56.9B
2:00pm US 
HPI m/m
  0.4% 0.4%
2:45pm US 
Flash Services PMI
  53.1 52.8
3:30pm US 
Crude Oil Inventories
  -1.7M 1.3M