METALS MORNING VIEW 01/02: Metals prices lose upward momentum

Base metals prices on the London Metal Exchange are struggling to extend gains and are consolidating in high ground this morning, Thursday February 1. Copper ($7,073 per tonne), zinc, aluminium and nickel prices are off between 0.2% and 0.4%, while lead and tin prices are up by 0.2% and 0.1% respectively.

Volume has been below average with 6,950 lots traded as of 07.07 am London time.

This follows a generally firmer tone to trading on Wednesday when most of the base metals closed the day higher with gains of between 0.4% and 0.7%, while aluminium closed down by 0.7% and tin was little changed.

Whereas on Wednesday China’s manufacturing purchasing manager’s index (PMI) disappointed the market with a reading of 51.3, which was below the 51.6 recorded in December, China’s Caixin manufacturing PMI came in unchanged at 51.5 this morning, while Japan’s manufacturing PMI climbed to 54.8 from 54.4.

The precious metals are weaker across the board this morning as consolidation continues: gold (-0.3% at $1,341.43 per oz,), silver (-0.7% at $17.23 per oz), platinum (-0.4% at $994.90 per oz) and palladium (-0.2% at $1,024.70 per oz).

On the Shanghai Futures Exchange today, base metals prices are for the most part lower, the exception is lead where prices are up by 0.7%, while the rest are down between 0.2% for copper at 53,000 yuan ($8,414) per tonne and nickel which is down by 0.7%. Spot copper prices in Changjiang are up by 0.3% at 52,770-52,920 yuan per tonne and the LME/Shanghai copper arbitrage ratio has dropped to 7.49.

In other metals in China, iron ore prices are down by 1% at 506.50 yuan per tonne on the Dalian Commodity Exchange. On the SHFE, steel rebar prices are up by 0.3%, while gold and silver prices are down by 0.3% and 0.1% respectively.

In wider markets, spot Brent crude oil prices are slightly firmer at $68.86 per barrel, the yield on US 10-year treasuries has firmed to 2.74%, and the German 10-year bund yield has climbed to 0.71%.

Equities in Asia are mixed today: Nikkei (-0.83%), Kospi (-0.05%), CSI 300 (0.47%), Hang Seng (0.45%) and ASX 200 (0.25%). This follows a firmer performance in western markets on Wednesday, where in the United States the Dow Jones closed up by 0.28% at 26,149.39, and in Europe where the Euro Stoxx 50 closed up by 0.07% at 3,609.29.

The dollar index is consolidating in low ground, it was recently quoted at 89.24, the low being 88.43 on January 25. The euro and sterling are also consolidating at 1.2399 and 1.4181 respectively, while the yen (109.61) and Australian dollar (0.8009) are weaker. The yuan remains strong at 6.3050, while the other emerging currencies we follow are either consolidating or giving back some of their recent gains.

On the economic agenda today is busy with manufacturing PMI data being released across Europe, the United Kingdom and the United States. Other US data includes Challenger job cuts, construction spending, natural gas storage and total vehicle sales.

High price levels and choppy trading go hand-in-hand and that is what we have been seeing of late. Trading today seems to be taking on a weaker tone, so again we would not be surprised to see prices test lower, but we expect good underlying support as overall we remain bullish for the fundamentals. With the Chinese Lunar New Year some two weeks away, it may be we see some profit-taking, which could lead to some further price weakness.

The pullback in the precious metals seems to be consolidation, like the base metals we expect price dips to attract buying.

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

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