METALS MORNING VIEW 10/12: Metals under pressure as broad market weakness weighs on sentiment
Base metals continue to face headwinds from the continuing trade dispute between the United States and China, but also from tension over the arrest of Huawei’s chief financial officer, Brexit, social unrest in France and stuttering equity markets.
Three-month base metals prices on the London Metal Exchange were down across the board on Monday December 10, with average losses of 0.5%, ranged between 0.2% for tin and 0.7% for nickel. Copper prices were off 0.5% at $6,116 per tonne.
Volume across the complex has been average, with 4,800 lots traded as at 7.43am London time.
Gold seems to be picking up haven demand with prices at $1,247.75 per oz, the highest they have been since July. The silver and platinum are not getting the lift that gold is, while palladium prices are consolidating recent gains.
In China this morning, the base metals prices on the Shanghai Futures Exchange were mixed; the February zinc contract was down by 0.9%, while the January aluminium price was up by 0.6% and the rest were up between 0.1% and 0.2%, with February copper off 0.1% at 48,930 yuan ($7,084) per tonne.
Spot copper prices in Changjiang were down by 0.3% at 49,070-49,450 yuan per tonne and the LME/Shanghai copper arbitrage ratio was firmer at 8.00.
In other metals in China, the May iron ore contract on the Dalian Commodity Exchange was up by 0.9% at 473.50 yuan per tonne. On the SHFE, the May steel rebar contract was down by 1.8%.
In wider markets, spot Brent crude oil prices were up by 1.32% at $62.11 per barrel as the Organisation of the Petroleum Exporting Countries (Opec) agreed to cut output by 1.2 million barrels a day. The yield on US 10-year treasuries was weaker at 2.8532% and the yield on the US 2-year and 5-year treasuries were at 2.7098% and 2.6961% respectively. The German 10-year bund yield was firmer at 0.2480%.
Asian equity markets on Monday were weaker: the Nikkei (-2.12%), the ASX 200 (-2.27%), the Kospi (-1.06%), the CSI 300 (-1.16%) and the Hang Seng (-1.23%).
This morning’s performance follows a mixed performance in western markets on Friday; in the US, the Dow Jones closed down by 2.24% at 24,388.95, while in Europe, the Euro Stoxx 50 was up by 0.41% at 3,058.53.
The dollar index has turned lower again and was recently quoted at 96.49. Given the weaker yields this is not surprising. The other major currencies we follow are mixed: euro (1.1428), sterling (1.2727), the Australian dollar (0.7219) and the yen (112.67).
The yuan is weakening again with the currency recently quoted at 6.9099, while most of the other emerging market currencies we follow are weak, although the peso and rouble are firmer - no doubt on the back of firmer oil prices.
The economic agenda is busy today, Japan’s economy watchers sentiment climbed to 51 from 49.5, data out later includes Italian industrial production, EU Sentix investment confidence, with UK data on GDP, manufacturing and industrial production, construction output, goods trade balance and index of services and there is US data on job openings.
Last week started on an optimistic note following the trade developments that emerged from the Group of Twenty (G20) meeting, but broader concerns that are affecting equity and bond markets seem to be acting as a headwind for the industrial metals. For the most part the base metals remain range bound, copper seems to have been the hardest hit last week and prices are looking vulnerable again. Out of all the base metals, zinc and lead look best placed to push higher.
Gold prices have broken higher and are trending upwards again, silver prices are trying to follow but seem to be struggling, while platinum prices are trending lower and palladium prices are consolidating below recent record highs.