METALS MORNING VIEW 04/04: Continuing trade tensions weigh on sentiment

Base metals prices on the London Metal Exchange are down by an average of 0.4% this morning, Wednesday April 4. Tin is the only metal showing any gains, while the rest are down between 0.4% and 0.7%, with copper off by 0.4% at $6,783 per tonne.

Volume has been average with 7,996 lots traded as of 07.36am London time.

This follows a general day of gains on Tuesday when the complex closed with average gains of 0.4%. Aluminium was the only one to close lower and indeed it broke below $2,000 per tonne to set a low of $1,978 per tonne, the lowest since August last year.

Precious metals are little changed this morning with gold and silver prices both up by 0.1% – with spot gold recently quoted at $1,334.37 per oz, while platinum and palladium prices are down by 0.1% and 0.2% respectively. This follows gains in bullion prices on Tuesday of around 0.5%, while platinum prices weakened by 0.6% and palladium prices sank by 2.1%

On the Shanghai Futures Exchange this morning, the base metals are showing weakness across the board with prices down between 0.1% for copper at 50,330 yuan ($8,002) per tonne and 1% for zinc.
Spot copper prices in Changjiang are up by 0.1% at 50,480-50,650 yuan per tonne and the LME/Shanghai copper arbitrage ratio has edged out to 7.42, from 7.40 on Tuesday.

In other metals in China, iron ore prices are down by 3.6% at 441 yuan per tonne on the Dalian Commodity Exchange. On the SHFE, steel rebar prices are down by 0.8%, silver prices are off by 0.5% and gold prices are unchanged.

In wider markets, spot Brent crude oil prices are down by 0.43% at $67.85 per barrel and the yield on US 10-year treasuries is firmer at 2.77%, as is the German 10-year bund yield at 0.50%.

Equity markets in Asia are mixed this morning: CSI 300 (-0.09%), Kospi (-1.41%), Hang Seng (-1.13%), Nikkei (+013%) and the ASX 200 (+0.16%). This follows a mixed performance in western markets on Tuesday, where in the United States the Dow Jones rebounded 1.65% to 24,033.36, and in Europe where the Euro Stoxx 50 closed down by 0.43% at 3,346.93.

The dollar index at 90.21 is looking stronger, each move above 90.45 and 90.94 would improve the currency’s outlook. The euro at 1.2267 is looking potentially top-heavy, sterling is consolidating at 1.4062, as is the Australian dollar at 0.7692, while the yen is looking weaker at 106.56. The yuan is giving back some of its recent gains, it was recently quoted at 6.2933. Most of the emerging market currencies we follow are split into two groups with the rupiah, rupee and real on a back footing, while the rand, ringgit and peso are showing strength.

The economic calendar is busy today with data out already showing China’s Caixin services purchasing managers’ index (PMI) dropped to 52.3, from 54.2 previously. Later there is the Italian and European Union unemployment rates, the United Kingdom’s construction PMI, EU consumer price index (CPI) along with a host of data from the US including ADP non-farm employment change, services PMI, factory orders and crude oil inventories. In addition, US Federal Open Market Committee Member Loretta Mester is speaking.

The recent rebounds across most of the metals are struggling, so it remains unclear whether recent strength was just a half-way pause in the downward correction. Given the continuing trade rhetoric and some soft economic data it is not surprising that consumers and investors feel little need to be aggressive buyers, while price weakness is prompting further stale long liquidation. Overall, we remain bullish on the outlook for the global economy, so we see the correction as temporary and are on the lookout for buying opportunities – any let-up in trade tensions may well spark another round of buying from consumers and investors alike.

Gold prices are consolidating in mid-ground, the market seems stuck in a $1,310-1,360 per oz range. Given jittery stock markets and trade tensions, it is surprising gold prices are not attracting more interest. That said, talk of summits between the US and North Korea and the US and Russia, as well constructive developments between some of the Arab majors and Israel, all point towards some easing in geopolitical tensions.

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

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