METALS MORNING VIEW 06/06: Base metals consolidate while havens on the rise

Base metals on the London Metal Exchange are slightly firmer this morning, Tuesday June 6, with prices up an average of 0.2%.

Three-month nickel prices lead the gains with a 0.4% rise to $8,895 per tonne, zinc prices are up 0.3%, aluminium prices are up 0.2% and lead prices are up 0.1%, while tin and copper prices are little changed, with copper at $5,649 per tonne. Volume has been light with 4,031 lots traded as of 06:26 BST. Today’s slightly firmer tone, follows a down day on Monday that saw prices close down an average of 0.8%, led by a 1.6% fall in nickel prices and 1.5% fall in zinc prices.

The precious metals are also firmer this morning – up by an average of 0.6% – led by a 0.8% rise in platinum prices, with palladium and silver prices up 0.5% and gold prices up 0.4% at $1,285.17 per oz. This comes after a quiet day on Monday when the precious metals complex was little changed.

In Shanghai this morning, the base metals trading on the Shanghai Futures Exchange (SHFE) are broadly weaker with zinc prices off 1.4%, aluminium prices off 0.5%, tin prices off 0.3% and copper prices down 0.1% at 45,210 yuan per tonne. Lead prices are leading on the upside with a 1.8% gain while nickel prices are up 0.2%.

Spot copper prices in Changjiang are down 0.4% at 45,050-45,150 and the LME/Shanghai copper arb ratio is slightly firmer at 8.01.

In other metals in China, September iron ore prices on the Dalian Commodity Exchange are down 0.5% at 433.5 yuan per tonne, while on the SHFE, steel rebar prices are down 0.7% and gold and silver prices are up 0.5% and 0.7%, respectively.

In international markets, spot Brent crude oil prices are down 0.5% at $49.19 per barrel and the yield on the US ten-year treasuries is weaker at 2.17%, as haven demand is on the rise on the back of a pick-up in geopolitical tensions over Qatar and ahead of a politically super-charged Thursday with the UK election and former FBI director James Comey’s testimony before the US Senate Intelligence Committee.

Equities ended Monday on a weaker footing with the Euro Stoxx 50 closing down 0.3% and the Dow down 0.1% at 21,184.04. In Asia this morning, equities are mixed with the Nikkei down 0.5%, the Kospi is off 0.1%, the ASX200 is down 1.4% while the CSI 300 is up 0.1% and the Hang Seng is up 0.3%. So not too much direction from equity markets this morning.

Currencies are giving more direction, however, with the dollar index falling to 96.60 and the yen strengthening to 109.68, which is again a sign of haven demand. The other currencies are also firm with the euro holding up in high ground at 1.1273, sterling at 1.2928 and the Australian dollar at 0.7493.

The yuan at 6.7967 has given back some of last week’s gains, it reached 6.7211 on June 1, but it is stronger than where it has been for most of the year. Most of the other emerging market currencies we follow are slightly firmer as the dollar weakens, the exception is the Brazilian real which has weakened.

UK data showed the BRC retail sales monitor fall 0.4%, while Japanese average cash earnings climbed 0.5% - recent data out of Japan has been looking strong, which is encouraging. Later there is data out on EU retail PMI and retail sales, the Sentix investor confidence index with US data including job openings and IBD/TIPP economic optimism – see table below for more details.

Copper prices continue to tread water either side of $5,650 per tonne and seem in no hurry to become more directional. The rest of the base metals are finding some support this morning, but the overall picture is one of weakness and vulnerability, although recent lows appear to be providing some support. For now the path of least resistance seems to be to the downside with the market concerned about slower growth. Given geopolitical/political tensions there is a risk of a broader market correction that could drag base metals prices lower in the short term, but overall we remain mildly bullish for the medium to longer term.

Gold prices are working higher and with the yen and US treasuries doing the same, this strength seems to be on the back of haven demand. The weaker dollar will also be helping. Silver and platinum are following gold’s lead, while palladium is strong but more on the back of its supply fundamentals. Key will now be whether gold prices can push up through the April high at $1,295.50 per oz.

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

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