METAL MORNING VIEW 23/05: Metals prices consolidate, flash PMI data may provide direction

Base metals prices on the London Metal Exchange are treading water this morning, Tuesday May 23, with prices down an average of 0.2%.

The pack is split with three-month copper and aluminium prices down 0.5%, with copper at $5,688 per tonne, nickel prices are off 0.3% at $9,370 per tonne, while lead prices are up 0.7%. Zinc and tin prices are little changed. Volume has been light with 3,927 lots traded.

Monday was generally a bullish day with copper, nickel, zinc and tin prices closing up between 0.3% and 0.5%, while lead and aluminium prices were down 0.7% and 0.2%, respectively.

The precious metals are firmer this morning with spot gold and silver prices up 0.1%, with gold at $1,262.39 per oz, while the PGMs are up an average of 0.4% – this comes after a bullish performance on Monday that saw prices rise an average of 1.2%, with the industrial precious metals up an average of 1.4%, while gold closed up 0.5%.

In Shanghai this morning, most of the base metals prices trading on the Shanghai Futures Exchange are stronger, the exceptions are aluminium that is off 0.9% and tin that is down 0.3%. Meanwhile, lead and zinc price are up 1.2%, nickel prices are up 0.4% and copper prices are up 0.3% at 45,950 yuan per tonne. Spot copper prices in Changjiang are up 0.3% at 45,830-45,980 yuan per tonne, while the LME/Shanghai copper arb ratio is little changed at 8.09.

In other metals in China, September iron ore prices on the Dalian Commodity Exchange are down 1.5% at 487 yuan per tonne, while on the Shanghai Futures Exchange, steel rebar prices are down 0.3%, gold prices are up 0.8% and silver prices are up 0.7%.

In international markets, spot Brent crude oil prices are down 0.3% at $53.55 per barrel and the yield on the US ten-year treasuries is a little weaker at 2.23% as a terrorist attack in the UK city of Manchester has lifted haven assets.

Equities were mixed on Monday with the Euro Stoxx 50 down 0.3%, while the Dow closed up 0.4% at 20,894.83. Asia is similarly mixed this morning, the Nikkei and ASX 200 are off 0.3%, the Kospi is up 0.4%, Hang Seng is up 0.2%, the CSI 300 is up 0.1%.

The dollar index continues to trend lower, it was recently quoted at 96.90 – having reached a low of 96.79 on Monday. Conversely, the euro is strengthening at 1.1245, sterling is flat at 1.2991, the yen is firmer at 111.01 and the Australian dollar is stronger at 0.7494. The weaker dollar should help underpin commodity prices.

The yuan is firmer at 6.8777, the Brazilian real at 3.2653 is recouping some of last week’s politically-induced losses and the other emerging market (EM) currencies are generally consolidating, with a slightly weaker bias, other than for the ringgit, which is firmer.

The economic agenda is busy, Japan’s flash manufacturing PMI dropped to 52 from 52.7 and Japan’s all industries activity fell to 0.6% from 0.7% and German final GDP at 0.6% was unchanged. Later, there is flash PMI data out across Europe and the USA, data on German Ifo business climate, UK data on public borrowing, inflation and CBI realised sales, with other US data including new home sales and the Richmond manufacturing index. There are also speeches from US Federal Open Market Committee (FOMC) members Neel Kashkari and Patrick Harker. See table below for more details.

The generally firmer tone in base metals seems to be consolidating this morning, but the metals prices still look well placed to continue higher, at least basis the charts. Flash PMI data may drive prices today, especially if the data shows strength as the feeling is that generally economic data has been softer of late. Prices still have more work to do on the upside before they will look bullish though.

Gold prices are edging higher and continuing political uncertainty in the USA combined with the weakening dollar seem to be the main drivers. Gold prices look well placed to push higher on the charts, but rebounding equity markets and stronger industrial metals may act as a headwind for prices. That said, if political uncertainty escalates, or there are disappointing US policy developments, then that could prompt a correction in equities, which could then lift demand for havens. Silver and platinum prices seem to be following gold’s lead, while palladium’s bout of weakness has run into some buying – we wait to see if its pullback has now run its course.

Metal Bulletin publishes live futures reports throughout the day, covering major metals exchanges news and prices.

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