LIVE FUTURES REPORT 22/09: LME base metals prices push higher, shrug off equities weakness

Dow Jones Futures were subject to a sharp sell-off on Monday, dragging LME base metals prices down with them that same day, but the emergence of dip-buying has led to a slight rebound for the metals during today’s morning session.

Nonetheless, market analysts were far from optimistic in regard to the complex’s fortunes, with some stipulating that a period of consolidation for metals futures, many of which are trading against a weak fundamental backdrop, remains on the horizon.

“I generally think that the LME base metals are trying to find their footing and remain in consolidation mode. We said repeatedly in August that the upward momentum was waning and that a pullback in prices would not come as a surprise,” Fastmarkets research analyst Andy Farida said.

“The rebound in the US dollar index is also gaining momentum and that will continue to act as a headwind for the LME base metals,” Farida added.

But the firmer dollar index, most recently up by 0.12% at around 93.68, has only had a marginal effect on the base metals this morning, largely failing to stifle marginal gains across the complex; only aluminium and nickel were lower at the time of writing.

The LME three-month nickel price was down by just $1 per tonne from the previous day’s afternoon kerb at $14,540 per tonne this morning – a surprising development ahead of electric vehicle (EV) giant Tesla’s “Battery Day” event in the United States later today, which was expected to be bullish for nickel prices.

Nonetheless, the buzz surrounding EV consumption of class 1 nickel units continues to abound, with China very much driving the market, whether it is from the stainless steel or EV sector.

“This morning Chinese buyers have been quietly picking up relatively cheap, cheap metal as they were never going to chase the market but just wait for an overdue correction and I see that some news stories are putting this down to buying from the EV sector, which is one we have not heard for a while,” Kingdom Futures chief executive officer Malcolm Freeman said in a morning note.

A moderate 120-tonne fresh outflow of nickel from LME warehouses in Port Klang, Malaysia, failed to buoy the three-month nickel price this morning.

Other highlights

• Brent Crude Oil futures were trading up by 0.26% around $42.40 per barrel this morning, buoyed by expectations of a reduction in US crude oil inventories tomorrow. Inventories are expected to drop by 2.5 million barrels. Futures are trading up on that basis despite the drop being almost half the previous week’s 4.4 million-barrel decline.
• China’s Conference Board Leading Index is expected later today, while market participants will also be looking forward to a testimony from Federal Reserve chair Jerome Powell later today.