- Dow fell 460 points at one stage yesterday, it closed down 173 points.
- US retail sales fell 0.3 percent, having been expected to fall 0.1 percent.
- US Empire State Manufacturing dropped to 6.2, it was expected to be 20.3, after 27.5
- China New Loans 857B v 750B expected; M2 +12.9%, expected 13%, previous 12.8%
The base metals suffered significant losses yesterday, by the close they were down an average of 2.6 percent, with nickel and zinc the hardest hit, down around 3.8 percent in price. Nickel set a low of $15,725, which was below the $15,869 from October 1. Lead and tin also set new lows at $1,985.50 and $19,500, which suggests the recent consolidation, was just a pause in the down trends. The sell-off in equities no doubt added downward weight to the industrial metals.
This morning the base metals are up an average of 0.6 percent as bargain hunting emerges into yesterday’s weakness. Tin is up one percent, the copper price is up 0.8 percent at $6,671.50 and lead and zinc are up around 0.7 percent while, aluminium is up 0.3 percent in price at $1,924 and nickel remains shelled-shocked at $15,736. Volume has been strong with 7,599 lots traded with 2,660 lots of zinc and 2,596 lots of copper, as of 06:15 BST.
In Shanghai, the December contracts are down an average of 1.5 percent, with the zinc price off the most with a 2.4 percent decline to Rmb 16,340, lead is off 1.6 percent at Rmb 13,550, copper is down 1.1 percent at Rmb 47,760 and aluminium is off 0.8 percent at Rmb 13,705. Steel rebar is up 0.1 percent at Rmb 2,611. The falls in Shanghai have been less severe than on the LME yesterday.
Spot copper in Changjiang fell one percent to Rmb 48,200-48,400, the backwardation with the futures is around an equivalent of $105/tonne and the LME/Shanghai copper arb ratio climbed to 1 to 7.15 as LME prices fell more than Shanghai – the arb window remains shut though.
Equities – were under relentless downward pressure during US morning trading that saw the Dow drop 460 points at one stage, before recovering in the afternoon to close down 173 points, a drop of 1.1 percent. The Euro Stoxx 50 had earlier closed down 3.6 percent. The weakness has generally flowed through to Asia to varying degrees with the Nikkei down 2.3 percent, the Hang Seng is off 0.7 percent, the Kospi is down 0.3 percent and the CSI 300 is up 0.2 percent. The combination of a late rebound in the Dow and a mixed reaction in Asia may mean the markets stabilise now – at least for a while.
Currencies – the dollar pulled back with the shake-out in equities and on the back of the disappointing data, with the dollar index falling to 84.45, it is last at 84.95. The euro picked up as the dollar slid, it is last at 1.2816, as did sterling last at 1.5973, after a low of 1.5874, the yen is off its high from yesterday which was at 105.19, last at 106.14 and the aussie climbed yesterday and is last at 0.8791.
The economic agenda is busy. Data out of China has been supportive, new loans, M2 money supply and foreign direct investment broadly improved compared with previous data, but the outright pick-up in new loans will provide some support we feel. European data includes: EU CPI and EU and Italian trade balances. There is a Spanish 10-year bond auction and Germany’s Bundesbank president Jen Weidmann speaks. US data included: initial jobless claims, industrial production, Philly Fed manufacturing, NAHB housing market index and crude oil inventories. FOMC member Narayana Kocherlakota is spreaking at 3pm BST – see table below.
Yesterday’s weakness brought the likes of copper, aluminium and zinc back to test support levels, but they held, but for lead, tin and nickel support was not present. We feel these three metals are looking increasingly oversold now, but much will probably depend on whether the three larger metals, notably copper, aluminium and zinc manage to hold up, or whether they head lower too. The fact that the Chinese markets did not sell-off to the same extent provides some support and as does this morning’s rebounds, all except nickel that is. On balance, if the rout in equities does not continue today then we feel the metals will pick-up some bargain hunting.
|Average (BM ex-Steel)||0.6%||7,599|
|3:00am||China||Foreign Direct Investment ytd/y||-1.4%||-1.8%|
|3:02am||China||M2 Money Supply y/y||12.9%||13.0%||12.8%|
|9:00am||EUR||Italian Trade Balance||3.24B||6.86B|
|10:00am||EUR||Final CPI y/y||0.3%||0.3%|
|10:00am||EUR||Final Core CPI y/y||0.7%||0.7%|
|Tentative||EUR||Spanish 10-y Bond Auction||2.08|1.5|
|Tentative||EUR||German Buba President Weidmann Speaks|
|1:00pm||USD||FOMC Member Plosser Speaks|
|2:15pm||USD||Industrial Production m/m||0.4%||-0.1%|
|2:15pm||USD||Capacity Utilization Rate||79.0%||78.8%|
|3:00pm||USD||Philly Fed Manufacturing Index||19.9||22.5|
|3:00pm||USD||FOMC Member Kocherlakota Speaks|
|3:00pm||USD||NAHB Housing Market Index||59||59|
|3:30pm||USD||Natural Gas Storage||91B||105B|
|4:00pm||USD||Crude Oil Inventories||2.3M||5.0M|