METALS MORNING VIEW 08/03: Base metals prices in search of support with correction still underway

Base metals traded on the London Metal Exchange are split into two camps this morning, Thursday March 8, with copper ($6,924 per tonne), nickel, zinc and tin prices all down by an average of 0.6%, while aluminium and lead prices are up by an average of 0.3%.

Volume has been average with 7,370 lots traded as of 06.43am London time.

This follows a day of weakness on Wednesday when prices were down by an average of 1.1%.

Precious metals prices are up across the board this morning, with gains ranged between 0.3% and 0.5% - spot gold prices are up by 0.3% at $1,328.05 per oz. This follows losses of between 1.1% and 1.8% yesterday.

On the Shanghai Futures Exchange this morning, the base metals are weaker, with prices down by an average of 1%. Nickel leads the decline with a 1.8% drop, while copper prices are down by 1.1% at 52,080 yuan ($8,235) per tonne. Spot copper prices in Changjiang are off by 0.5% at 51,690-51,810 yuan per tonne and the LME/Shanghai copper arbitrage ratio has eased to 7.52, from 7.53 on Wednesday.

In other metals in China, iron ore prices are down by 2.8% at 505.50 yuan per tonne on the Dalian Commodity Exchange. On the SHFE, steel rebar prices are down by 2.6%, while gold prices and silver prices are down by 0.3% and 0.6% respectively.

In wider markets, spot Brent crude oil prices are off by 0.27% at $64.36 per barrel, while the yield on US 10-year treasuries has edged up to 2.88%, while the German 10-year bund yield has edged up to 0.67%.

Equity markets in Asia are rebounding this morning: Nikkei (+0.54%), Hang Seng (+1.43%), CSI 300 (+0.79%), ASX 200 (+0.69%) and the Kospi (+1.30%). This follows a mixed performance in western markets on Wednesday, where in the United States the Dow Jones closed down by 0.33% at 24,801.36, and in Europe where the Euro Stoxx 50 closed up by 0.58% at 3,377.36. Strong Chinese exports suggest a robust global growth ex-China.

The dollar index was recently quoted at 89.62, little changed from this time yesterday when it was 89.53. With the dollar consolidating, so are the euro (1.2400), sterling (1.3893), yen (105.94) and Australian dollar (0.7826). The yuan is slightly weaker at 6.3294. In the emerging market currencies we follow, we are watching the continued weakness in the Indonesian rupiah that has weakened to 13,772 from 13,275 at the start of February - the weakness may well signal some early concern about the direction of US interest rates and the burden they could become on emerging market debt.

Economic data out already today has seen data on UK house prices, China’s trade balance, where the surplus expanded as exports soared, while the Lunar New Year holiday dented imports, Japan’s economy watchers sentiment eased to 48.6 from 49.9 and German factory orders dropped 3.9%, after a prior 3% gain. Data out later includes US Challenger job cuts, the European Central Bank rate decision and press conference, US initial jobless claims and natural gas storage data.

The base metals remain under pressure with the correction in prices still underway, which we see is being driven by uncertainty over the combination of whether a trade war is about to kick-off, a more hawkish US Federal Reserve, nervous equity markets and some disappointing manufacturing purchasing managers’ index (PMI) data for February.

We expect these headwinds will pass and the underlying concerted global growth to underpin commodity prices, but sentiment may be weak for a while as these uncertainties prevail. As such, we would let any weakness run its course but be on the lookout for buying opportunities once the winds start to change direction.

We wait to see if the mood from Metal Bulletin’s International Copper conference in Madrid provides direction to prices.

Gold prices are holding up well and the uncertainty mentioned above is likely to prompt a pick-up in haven interest, this is also underpinning silver prices, while the more industrial platinum group metals are suffering in line with the base metals.

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

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