METALS MORNING VIEW 12/03: Metals consolidate Friday’s rebound gains

Base metals traded on the London Metal Exchange are once again weaker across the board this morning, Monday March 12, with prices off by an average of 0.4%. Losses are fairly tightly grouped between 0.2% and 0.7%, with the three-month copper price down by 0.4% at $6,930 per tonne.

Volume has been average with 8,181 lots traded as of 07.17am London time.

Today’s weakness follows strong rebounds last Friday, helped by the strong US employment report, after what had been a week of general weakness. Average gains on Friday were 1.8%.

The precious metals prices are generally slightly weaker this morning with gold, silver and palladium prices off between 0.1% and 0.3%, while platinum prices are up by 0.1%. Gold prices were recently quoted at $1,321.90 per oz. This follows a day of gains on Friday that saw average gains of 1.1%, mainly driven by the industrial precious metals.

On the Shanghai Futures Exchange this morning, aluminium prices are off by 0.8%, while the rest are firmer by an average of 1.1% - led by a 3.5% gain in nickel prices. Copper prices are up by 0.9% at 51,990 yuan ($8,211) per tonne. Spot copper prices in Changjiang are up by 1% at 51,500-51,660 yuan per tonne and the LME/Shanghai copper arbitrage ratio has eased to 7.50, from 7.56 on Friday.

In other metals in China, the steel sector remains under pressure with iron ore prices down by 2.6% at 479 yuan per tonne on the Dalian Commodity Exchange. On the SHFE, steel rebar prices are down by 0.5%, while gold prices are down by 0.2% and silver prices are up by 0.1%.

In wider markets, spot Brent crude oil prices are off by 0.36% at $65.31 per barrel - this after a rally on Friday. The yield on US 10-year treasuries has jumped to 2.91%, again helped by the strong US employment data on Friday, while the German 10-year bund yield has also firmed to 0.66%.

Equity markets in Asia are rebounding this morning: Nikkei (+1.65%), Hang Seng (+1.89%), CSI 300 (+0.46%), ASX 200 (+0.55%) and the Kospi (+1.08%). This follows accelerated gains in western markets on Friday, where in the United States the Dow Jones closed up by 1.77% at 25,335.74, and in Europe where the Euro Stoxx 50 closed up by 0.21% at 3,420.54.

The dollar index at 89.92 is giving back the limited gains it made on Friday. Considering the better US data on Friday and the firmer treasury yields it is surprising the dollar is not firmer - suggesting concerns about a trade war linger. The major currencies are firmer: Euro (1.2336), sterling (1.3871), yen (106.60) and Australian dollar (0.7878). The yuan is firmer too at 6.3230, while the emerging market currencies we follow that have been weaker of late seem to be attempting to strengthen again. The others remain in consolidation mode.

The economic agenda is light today - data out already shows Japan’s machine tool orders climb 39.5%, down from the previous reading of 48.8%, but orders have been rising since January 2017. Later there is data on the US Federal budget balance and there is a Eurogroup meeting.

Friday’s rebound in the base metals prices halted the recent slide, but with prices lower this morning we will need to see if bargain hunting comes in again today. The early indications are not that great, although SHFE prices were firmer, as are equities and the dollar has not reacted that positively to Friday’s better US data, so there may be a chance for prices to catch a tailwind. We have seen the recent prices weakness as a pause in the overall uptrends, we still see concerted global growth as being bullish for the metals, but the uncertainty over trade wars may mean consumers are in no hurry to step off the sidelines.

The dip in gold prices last week ended with a rebound on Friday and prices are now consolidating again. The fact gold prices rallied with the other metals and oil prices on Friday, supports our view that gold and the precious metals are all being seen as being part of the commodity trade, which is offering some diversification from equity-heavy portfolios.

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

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