METALS MORNING VIEW 04/03: Metals prices mixed; trade optimism provides support while participants eye copper flows

Three-month base metals prices on the London Metal Exchange were for the most part stronger on the morning of Monday March 4, with all but tin in positive territory. The complex recorded an average gain of 0.4%, while tin was down by 0.1% at $21,630 per tonne.

Nickel led on the upside with a 1% gain to $13,305 per tonne, having closed last Friday at $13,175 per tonne, and copper was up by 0.3% at $6,464 per tonne, having ended last week at $6,442 per tonne.

Spot precious metals prices were mixed this morning; gold was little changed at $1,293.66 per oz, silver was up by 0.3% at $15.22 per oz after a close of $15.18 per oz on Friday, platinum was down by 0.1% at $856.20 per oz compared with a previous close of $857 per oz, and palladium was off by 0.3% at $1,544.90 per oz after a close of $1,549 per oz on Friday.

In China, base metals prices on the Shanghai Futures Exchange were similarly mixed with the April contracts for aluminium, zinc and lead and the May contract for nickel showing average gains of 0.9% compared with their closes on Friday, while the other base metals weakened. April copper was down by 0.3% at 50,120 yuan ($7,471) per tonne, after a close of 50,270 yuan per tonne on Friday, while May tin was off by 0.3% at 150,370 yuan per tonne, after a previous close of 150,880 per tonne.

The spot copper price in Changjiang was up by 0.2% at 49,860-50,080 yuan per tonne this morning, compared with 49,740-49,960 yuan per tonne on Friday, while the London/Shanghai copper arbitrage ratio was slightly weaker at 7.76, little changed from the end of last week.

In other metals in China, the May iron ore contract on the Dalian Commodity Exchange was up by 0.6% at 620.50 yuan per tonne, compared with 616.50 yuan per tonne at the close on Friday. On the SHFE, the May steel rebar contract was up by 1.1% at 3,819 yuan per tonne, compared with 3,777 yuan per tonne at Friday’s close.

In wider markets, the spot Brent crude oil price was up by 0.51% at 65.21 per barrel, compared with $65.04 per barrel from Friday’s close.

The yield on US 10-year treasuries was recently quoted at 2.7559%. The yields on the US 2-year and 5-year treasuries are no longer inverted and were recently quoted at 2.5516% and 2.5579% respectively. The German 10-year bund yield was at 0.1800%.

Asian equity markets were mainly stronger on Monday on optimism for a trade deal: Nikkei (+1.02%), Hang Seng (+0.75%), the CSI 300 (+1.18%) and the ASX 200 (+0.40%), the exception was the Kospi (-1.76%).

This follows a stronger performance in western markets on Friday; in the United States, the Dow Jones Industrial Average closed up by 0.43% at 26,026.32, and in Europe, the Euro Stoxx 50 closed up by 0.42% at 3,312.10.

The dollar index is climbing again and was recently quoted at 96.47. The stronger dollar has put downward pressure on the other major currencies we follow: the euro (1.1358), sterling (1.3243), the yen (111.92) and the Australian dollar (0.7085).

The yuan is consolidating off recent highs and was recently quoted at 6.6961. Most of the other emerging market currencies we follow are either consolidating, or on a slightly weaker footing.

There is not much economic data due on Monday, but the highlights include the Spanish unemployment change, EU Sentix investor confidence, UK construction purchasing managers index (PMI), EU producer price index (PPI) and US construction spending.

For the most part the base metals have become more upbeat in recent weeks, especially copper, nickel and tin, while the rest have been oscillating higher. Sentiment seems to have improved on the back of optimism on trade, while generally poor economic data is at times acting as a headwind. The focus on copper is the low level of metal on warrant in the LME warehouse system, but rumors that shorts may deliver metal against their shorts positions has halted the rally for now.

The stronger tone in gold and silver is reversing which may well be a sign that the outlook for the global economy may be about to improve if a trade deal is nearing. Platinum prices are following gold’s lead, while palladium prices are holding up relatively well as they are supported by tight fundamentals.

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