METALS MORNING VIEW 13/07: Good Chinese trade data buoys metals prices

Base metals prices on the London Metal Exchange are up across the board by an average of 0.6% this morning, Thursday July 13, thereby extending the general firmer tone that has got underway this week.

Today’s strength has been boosted by further robust Chinese trade data and a weaker dollar on the back of a slightly more dovish US Federal Reserve (Fed). Nickel leads the advance with a 0.9% gain, copper prices are up 0.3% at $5,920 per tonne and volume has been above average of 6,065 lots.

This comes after a mixed day of trading on Wednesday when the complex closed up 0.1%, with gains seen in copper (0.5%) but losses seen in aluminium (-0.6%).

Precious metals prices are similarly firmer this morning with average gains of 0.4%, led by a 0.8% rebound in spot platinum prices to $919.90 per oz, while gold prices are up 0.4% at $1,224.30 per oz. This follows a stronger day on Wednesday when the complex closed up 0.9%, with the PGMs leading the advance with gains either side of 1.5%.

On the Shanghai Futures Exchange (SHFE), base metals prices are up an average of 0.4%, led by a 1% rise in nickel prices, copper prices are up 0.3% at 47,330 yuan ($6,983) per tonne, while lead prices are off 0.3%. Spot copper prices in Changjiang are off 0.1% at 46,980-47,100 yuan per tonne and the LME/Shanghai copper arb ratio has eased to 8.00.

In other metals in China, September iron ore prices on the Dalian Commodity Exchange are off 0.2% at 489 yuan per tonne, while on the SHFE, steel rebar prices are up 1.2%, silver prices are up 1% and gold prices are up 0.4%.

In international markets, spot Brent crude oil prices are little changed at $47.68 per barrel and the yield on the US ten-year treasuries has eased to 2.32%, while the German ten-year bund yield has dipped to 0.52%.

Equities were bullish on Wednesday with the Euro Stoxx 50 closing up 1.5% and the Dow closed up 0.6% at 21,532.14, having earlier set a fresh record high. Asia this morning is also upbeat with the Kospi also setting a high for the year, it closed up 0.7%, the ASX 200 is up 1.1%, the Hang Seng is up 1%, the CSI 300 is up 0.6% and the Nikkei is little changed.

The dollar index’s recent show of strength/consolidation has given way to further weakness with the index falling to a low of 95.46, the low from June 30 was 95.47. The slightly less-hawkish stance in Fed chair Janet Yellen’s testimony is no doubt partially behind the weakness as is the continuing Washington political saga. The euro is consolidating at 1.1447, sterling is firmer at 1.2940, as is the yen at 113.16, while the Australian dollar at 0.7711 continues to strengthen, reaching levels not seen since March.

Data out already showed strong Chinese trade data with exports up 11.3% and imports up 17.2% in dollar terms and the country’s foreign direct investment fell less than expected – it has been either side of unchanged since March. German consumer price index (CPI) was up 0.2%, unchanged from May and French CPI was flat, also unchanged from May. Data out later includes Bank of England credit conditions, US producer price index (PPI), initial jobless claims, natural gas storage and the Federal budget balance. In addition, Janet Yellen is testifying before the US Senate Banking Committee and US Federal Open Market Committee members Charles Evans and Lael Brainard are speaking.

Base metals prices are for the most part looking stronger, aluminium perhaps the one looking the most hesitant. The strong Chinese trade data, upbeat equities and generally concerted global growth, albeit slow, may well underpin firmer base metals prices even though we are in the slower summer months.

Gold prices are trying higher and a slightly weaker Fed stance and dollar may well underpin prices and lead to bargain hunting, but stronger equities will be a headwind and we do not see the geopolitical scene as providing much support at the moment, although that could change in double quick time – again the rhetoric over North Korea has gone suspiciously quiet.

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

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