METALS MORNING VIEW – Metals firmer as they hold on to Friday’s gains

The base metals put in an exceptionally strong performances on Friday fuelled by the Glencore cuts in zinc and lead, which in turn followed the copper cuts from a few weeks ago. This led to a 4.6 percent average rally, led by a 10.3 percent rally in zinc. Copper closed up 2.7 percent at $5,300. Precious metals closed up an average of 1.8 percent on Friday, led by a 3.7 percent gain in platinum that closed $978, while gold closed up 1.4 percent at $1,155.90.

This morning the base metals are firmer by an average of 0.4 percent with aluminium and lead up 0.6 percent, copper up 0.5 percent at $5,328 and zinc up 0.4 percent, while nickel and tin are little changed. Volume has been strong with 6,673 lots traded as of 06:5 BST.

Precious metals are stronger with average gains of 0.7 percent, platinum is still playing catch-up with a 1.1 percent gain to $988.40, gold is up 0.7 percent at $1,163.90 and silver and palladium are up around 0.5 percent.

In Shanghai, the base metals are up an average of 1.5 percent, led by a 2.9 percent gain in zinc, nickel is up 1.8 percent, copper is up 1.2 percent an Rmb 40,070 and the others are up around one percent. Spot copper in Changjiang is up 0.6 percent at Rmb 40,100-40,250, the spread with the futures is at around an equivalent of $27 per tonne back, while the LME Shanghai copper arb ratio is near parity at 7.53.

In other metals in Shanghai, gold is up 0.8 percent, silver is up 0.3 percent, steel rebar is up 0.5 percent and iron ore is last around $56.

Equities – On Friday the Euro Stoxx 50 closed up 0.8 percent, the Dow was up 0.2 percent and in Asia this morning the CSI 300 is up 3.3 percent, the Hang Seng is up one percent, the ASX200 is off 0.9 percent and the Kospi is up 0.1 percent. Japan is closed.

Currencies – the dollar index continues to drift lower, last at 94.79 – conversely other currencies are strengthening with the euro at 1.1366, sterling at 1.5332 and the aussie at 0.7338. Emerging market currencies are also stronger with the rouble at 61.41, the yuan at 6.3177 and the rupiah, real, rand, ringgit and rupee are all holding on to most of their recent gains – which is a sign of broader market confidence.

The economic agenda is mainly taken up with central bankers speakers, with FOMC members Dennis Lockhart, Charles Evans, Lael Brainhard and UK MPC member Martin Weale, speaking. In addition, UK leading indicators are out at 2:30 BST.

The metals are seeing good follow through buying this morning, given the extent of Friday’s gains and the fact the focus was on zinc and lead, we are somewhat surprised all the metals have been as bullish as they have, but shorts may well have become more nervous about cutbacks generally. That said, we would be wary of chasing those metals that have not seen cutbacks yet. With LME Week underway the metals may also get jitterier as market participants exchange views. Given the impressive gains since Friday morning, we would not be surprised to see some consolidation of the gains.

The rebounds in the precious metals are looking strong and robust and the weaker dollar is fuelling that, which goes hand-in-hand with the likelihood that US interest rates will stay on hold for longer. CFTC data out on Friday evening also showed both fresh buying and short-covering.

 

Overnight Performance      
BST 06:45 +/- +/- % Lots
Cu                         5,328 28 0.5% 2181
Al 1621 9 0.6% 574
Ni 10590 0 0.0% 731
Zn 1859 8 0.4% 2857
Pb 1792.5 11.5 0.6% 321
Sn 16000 0 0.0% 9
Steel  300 0 0.0% Total
  Average (BM ex-Steel) 0.4%         6,673
Gold 1163.9 8 0.7%  
Silver 15.89 0.07 0.4%  
Platinum 988.4 10.4 1.1%  
Palladium 710.2 3.2 0.5%  
  Average PM   0.7%  

 

SHFE Prices 06:45 BST   Change % Change
Cu 40070 490 1.2%
AL  11620 120 1.0%
Zn 14495 415 2.9%
Pb 13625 150 1.1%
Ni 79920 1390 1.8%
Sn 99280 830 0.8%
Average change (base metals) 236.5   1.5%
Rebar 1854 10 0.5%
Au 236.85 1.9 0.8%
Ag 3468 10 0.3%

 

Economic Agenda
BST Country Data ACTUAL Expected Previous
All Day Japan Bank Holiday      
All Day Canada Bank Holiday      
All Day US Bank Holiday      
 1:10pm US FOMC Member Lockhart Speaks      
2:00pm UK MPC Member Weale Speaks      
2:30pm UK CB Leading Index m/m     -0.3%
3:30pm US FOMC Member Evans Speaks      
9:30pm

US

FOMC Member Brainard Speaks