METALS MORNING VIEW 11/04: Metals prices remain on a back footing

Most of the base metals prices on the London Metal Exchange have stopped sliding this morning, Tuesday April 11, at least for now. On average the complex is up 0.1%, with copper, aluminium, nickel and lead prices up between 0.3% and 0.5%, while zinc prices are off 0.4% and tin prices are down 0.2%.

Volume has been average with around 6,000 lots traded as of 06:32 BST. This morning’s consolidation comes after some down days, with prices closing down an average of 1.2% on Monday. The metal showing the most weakness is zinc, the rest seem to be treading water.

Gold and silver spot prices are little changed this morning, while the more industrial PGMs are up 0.4%. Gold prices were trading around $1,256.25 per oz as of 06:32 BST. This comes after a day that saw gold prices edge higher on Monday, while silver was little changed and the PGMs were down an average of 1.5%.

In Shanghai this morning, base metals prices are for the most part weaker, nickel prices are once again bucking the trend with a 0.2% gain, while the rest are down an average of 1% ranged between a 2.2% fall in zinc prices and a 0.1% fall in copper prices that were trading at 46,950 yuan per tonne. Spot copper prices in Changjiang are off 0.8% at 46,640-46,760 yuan per tonne and the LME/Shanghai copper arb ratio has jumped to 8.14 after 8.02 on Monday.

In other metals in China, September iron ore futures rebounded 1.1% on the Dalian Commodity Exchange, while on the Shanghai Futures Exchange, steel rebar prices are down 0.4%, gold prices are down 0.2% and silver prices are off 0.9%. In international markets, spot Brent crude oil prices are off 0.2% at $55.85 per barrel and the yield on the US ten-year treasuries has eased to 2.34%.

Equities were weaker in Europe on Monday with the Euro Stoxx 50 closing down 0.4%, while the Dow closed little changed at 20,658. Asia this morning is for the most part weaker with the Nikkei down 0.4%, as is the Kospi, the Hang Seng is down 1%, the CSI 300 is off 1.1%, while the ASX 200 is up 0.4%.

The dollar index climbed to a high of 101.35 on Monday, it was recently quoted at 101.03, the euro remains weak at 1.0587, as does the Australian dollar at 0.7502, while the sterling is flat at 1.2417 and the yen is strong at 110.67. In emerging markets, the yuan is weaker at 6.9057 and most other emerging market currencies are slightly firmer after seeing a bout of weakness recently. The rand remains on a back footing.

The economic agenda is busy, UK’s British Retail Consortium (BRC) retail sales monitor dropped 1%, data out later includes Japanese preliminary machine tool orders, a host of UK price data, German and EU ZEW economic sentiment, EU industrial production, with US data including small business index, jobs opening and US Federal Open Market Committee member Neel Kashkari is speaking – see table below for more details.

The base metals remain under pressure but the price weakness so far seems limited to routine pullbacks, the exception being zinc which has broken support. That said, there is no appetite to chase prices higher so the upsides look capped and that does run the risk that there could be further stale long liquidation. With a pick-up in geopolitical tension following the US missile attack on Syria and with the market wondering whether the USA will take a firmer stance against North Korea, combined with all the uncertainty surrounding the upcoming French presidential election, there is an undercurrent of not putting on risk – key will be whether that swings to risk-off.

In line with the above, gold prices are holding up well, while the more industrial precious metals are pulling back a bit.

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

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