Base metals prices are consolidating on the London Metal Exchange this morning, Tuesday February 21, with prices down an average of 0.3%, with all the metals, except tin, off between 0.2% for zinc and 0.7% for nickel – volume has been average with 6,164 lots traded as of 06:48 GMT.
Today’s slight pullback comes after a strong performance on Monday when the base metals complex closed up with average gains of 1.5%, led by lead and zinc that were up 2.8% and 2.5%, respectively, while three-month copper prices closed up 1.7% at $6,070 per tonne.
The precious metals are little changed this morning, with spot gold prices off 0.2% at $1,234.18 per oz, silver prices are off 0.3%, while platinum is unchanged and palladium prices are up 0.1%. On Monday, gold, silver and platinum prices were firmer by an average of 0.3%, while palladium prices were off 0.6%.
In Shanghai this morning, the base metals are firmer across the board by an average of 1.2% with gains between 0.3% for nickel and 2.1% for zinc, while copper prices are up 1.1% at 48,930 yuan per tonne. Spot copper prices in Changjiang are up 1.2% at 48,800-49,000 yuan per tonne and the LME/Shanghai copper arb ratio is at 8.09.
In other metals in China, May iron ore prices have surged 3.9% on the Dalian Commodity Exchange, on SHFE steel rebar prices are up 1.6%, while gold prices are off 0.2% and silver prices are up 0.2%. In international markets, spot Brent crude oil prices are up 0.2% at $56.21 per barrel.
Equities are holding up but not rallying much with the Euro Stoxx 50 closing up 0.1% on Monday and the Dow closing little changed. Asia this morning, for the most part, remains upbeat with the Nikkei up 0.7%, the Kospi is up 0.9%, the Hang Seng is off 0.6%, the CSI 300 is up 0.3% and the ASX 200 is off 0.1%.
In FX, the dollar index appears to be starting off on another up leg with the index recently quoted at 101.60 – some hawkish US Fed talk saying a March rate rise is not off the table is boosting the dollar. Conversely, other major currencies are weaker with the euro at 1.0584, the yen at 113.50, the Australian dollar at 0.7664 and the sterling at 1.2445. Emerging market currencies are also slightly weaker with the yuan at 6.8630 and the rest on a slight back footing.
The economic agenda is busy with the focus on flash manufacturing and services PMI data. Japan’s manufacturing PMI climbed to 53.5 from 52.7, but the country’s all industries activity dropped 0.3%. In addition to PMI data there is data out on French CPI, UK borrowing and UK inflation. Furthermore, there is an EU Ecofin meeting and US Federal Open Market Committee members Neel Kashkari and Patrick Harker are speaking – see table below for more details.
The base metals are for the most part consolidating this morning after rebounding on Monday. High prices appear to be attracting profit-taking and some selling, while the stronger dollar is a headwind too. That said, the underlying sentiment remains bullish and we expect that to remain the case as the seasonally stronger second quarter still lies ahead.
Gold prices are trading sideways, there appears to be supply above $1,240 per oz that is capping the upside for now. The fact prices are holding up given the strength in equities and the dollar suggests underlying sentiment remains bullish, but if prices fail to get upside momentum then there are likely to be bouts of stale long liquidation that cause price pullbacks. We would expect dips to be well supported though. Silver and the PGMs seems to be showing a bit more weakness this morning, which is in line with the weaker tone being seen in the base metals too.
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