METALS MORNING VIEW 09/06: Base metals prices consolidate Thursday’s gains

Base metals prices on the London Metal Exchange are for the most part weaker this morning, Friday June 9, with tin prices down 0.4%, aluminium prices off 0.3%, while copper, nickel and lead prices are off 0.1%. Zinc prices are bucking the downtrend with a 0.4% gain.

Volume has been average with 6,339 lots traded. This comes after a stronger day for most of the metals on Thursday, tin being the exception, with the other metals up an average of 1%, led by a 2.2% rise in copper. Tin prices, however, fell 1.6% to $19,080 per tonne as China has allowed Yunnan Tin to toll smelt and export tin tax-free.

Gold prices, along with the rest of the precious metals are down an average of 0.3% this morning, ranged from down 0.1% for palladium prices and down 0.4% for silver prices. This comes after a generally weaker day for gold, silver and platinum, where prices were off an average of 0.7%, while palladium rallied 3.2%.

In Shanghai this morning, the base metals trading on the Shanghai Futures Exchange (SHFE) are for the most part bullish, led by a 1.8% gain in zinc prices, copper is up 1.6% at 45,780 yuan per tonne ($6,734 per tonne) and lead prices are up 1%, while the rest are little changed.

Spot copper prices in Changjiang are up 1.4% at 45,670-45770 yuan per tonne and the LME/Shanghai copper arb ratio has dropped to 7.97, implying LME prices have rallied more than SHFE prices.

In other metals in China, September iron ore prices on the Dalian Commodity Exchange continue to weaken with prices off 1.5% at 423 yuan per tonne, while on the SHFE, steel rebar prices are up 0.8% and gold and silver prices are down 1.1% and 1.3%, respectively.

In international markets, spot Brent crude oil prices are down 0.3% at $47.70 per barrel and the yield on the US ten-year treasuries is slightly firmer at 2.20%.

Equities ended Thursday with the Euro Stoxx 50 closing up 0.4% and the Dow was little changed at 21,182.53. In Asia this morning, the Kospi is up 0.8%, the Nikkei and CSI 300 are both up 0.5%, the Hang Seng is off 0.4% and the ASX 200 is little changed.

The dollar has turned higher with the dollar index at 97.43. It seems as though lack of policy change from the European Central Bank on Thursday weakened the euro (1.1189) and little market impact from former US Federal Bureau of Investigation director James Comey’s testimony before the US Senate Intelligence Committee has lifted the dollar. The UK election result has hit sterling hard (1.2667), the yen is weaker at 110.39 and the Australian dollar is consolidating recent gains at 0.7539.

The yuan at 6.7971 remains firm and the other emerging market currencies we follow are for the most part flat.

The economic agenda is busy with some better Chinese data – the country’s consumer price index (CPI) climbed to 1.5% from 1.2%, while its producer price index (PPI) came in at 5.5% from 6.4% previously – and again some better Japanese data with tertiary industry activity climbing 1.2% having been expected to rise 0.5%. Other data includes German trade balance, French government budget balance and industrial production, Italian unemployment rate, UK manufacturing and industrial production, construction output, goods trade balance, consumer inflation expectations, GDP estimates and US wholesale inventories – see table below for more details.

It does look as though better Chinese trade data did give most of the base metals a lift on Thursday but consolidation is underway this morning. Copper looks well placed to push higher, while at the opposite end of the spectrum tin has sold off heavily, but it does seem to be finding some dip-buying. The rest continue to look vulnerable.

The precious metals are consolidating recent gains, palladium has been super-charged – we wait to see if it can push ahead again, while gold prices are likely to face a headwind now that the dollar is firmer. We do expect gold, silver and platinum prices to be well supported into dips.

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

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