METALS MORNING VIEW 11/04: Base metals prices consolidate, await further clarity

Base metals prices on the London Metal Exchange are consolidating this morning, Wednesday April 11, following a strong recovery in the previous session.

Copper and nickel were down by 0.5% and 0.4% respectively at the time of writing, while the rest were mostly unchanged – the exception being tin which was up by 0.5% at $21,030 per tonne.

Volumes traded were somewhat lighter than usual, with 5,647 lots as of 06.38 am London time.

At 89.50, the weak dollar index has kept the precious metals complex well bid, with gold up by 0.1% at $1,341 per oz, while silver was consolidating near $16.55 per oz. The broad-based recovery seen in the base metals has spilled over into the more industrial precious metals. Platinum and palladium logged increases of 0.4% and 0.2% respectively this morning, retaining most of the gains the two metals made on Tuesday.

It was a mixed bag on the equity front this morning, with the Nikkei down by 0.49% while Hang Seng was up by 0.54%. Elsewhere, gains were seen right across the US equity index after tensions eased further on Tuesday, with the Dow closing up by 1.79% or 429 points at 24,408.

Trading sentiment in China remains upbeat following comments from Chinese President Xi Jinping that helped to ease market tensions. On the Shanghai Futures Exchange, base metals prices were up by an average of 0.2%. Nickel was the star performer with a solid gain of 1%, while copper and zinc also contributed to the general strength with gains of 0.3%, which helped offset the 0.4% decline seen in tin.

In other metals in China, steel rebar on the SHFE was notably weaker, down by 0.8%, while iron ore prices stood unchanged at 450.5 ($71.60) yuan per tonne on the Dalian Commodity Exchange.

Economic data this morning came in weaker than expected. Inflation pressure is starting to ease in China with both the consumer price index (CPI) and producer price index (PPI) readings below February’s reading of 2.9% and 3.7% respectively. China’s CPI in March came in at 2.1%, below an expected print of 2.6%. Similarly, the country’s PPI missed with a reading of 3.1% – 3.2% had been called for. Later, we have US CPI and the US Federal Open Market Committee (FOMC) minutes of note.

Despite the positive dialogue from Xi, trade issues between China and the US remain unresolved. Tensions remain high and there was a potential discussion that China could look into a gradual yuan devaluation as the trade rhetoric escalated to another level. As such, overall sentiment among global investors remains fragile and any slight hint of a risk-off could unwind most of the gains seen on Tuesday.

Aluminium continues to dominate the base metals complex with the Rusal sanction continuing to gyrate market expectations on future supply. The broad-based recovery in the base metals continue to rely on the trade rhetoric from the US and China. We wait to see if follow-up buying emerges to support prices higher or whether traders turn cautious again and put up a ‘wait-and-see’ stance. But with trade tensions easing after President Xi’s speech at the Boao Forum on Tuesday, it is now up to President Trump and his administration to respond.

The fact that the precious metals complex has gained further ground suggests that overall risk sentiment is far from bullish. Global investors are still nervous over the unresolved trade issues between the US and China, a possible retaliation from Russia over the latest US sanctions and potential military strike in Syria.

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