METALS MORNING VIEW 14/11: Metals prices, sentiment remain gloomy

Three-month base metals prices on the London Metal Exchange were broadly weaker on the morning of Wednesday November 14, with the three-month copper price down by 0.1% at $6,040 per tonne. This after Tuesday’s energetic start that saw the red metal reach $6,181 per tonne at one point.

Three-month nickel, lead and zinc were down by 0.2%, 0.3% and 1% respectively on the LME this morning, while three-month aluminium and tin were up by 0.2% and 0.3% respectively.

Volume has been below average with 4,795 lots traded as at 06.30am London time.

Precious metals were unchanged to weaker, with spot gold and silver prices unchanged at $1,202.78 per oz and $14.00 per oz respectively while the platinum group metals were off by around 0.3%.

In China, base metals prices on the Shanghai Futures Exchange were for the most part weaker, the exception being the January tin contract that was up by 0.1%. The rest were down between 0.1% for the January aluminium contract and 1% for the January zinc and January nickel contracts. The January copper contract on the SHFE was down by 0.2% at 48,800 yuan ($7,012) per tonne.

Spot copper prices in Changjiang were up by 0.2% at 48,890-48,990 yuan per tonne and the LME/Shanghai copper arbitrage ratio was weaker at 8.06, after 8.06 on Tuesday.

In other metals in China, the January iron ore contract on the Dalian Commodity Exchange was down by 1.1% at 510 yuan per tonne. On the SHFE, the January steel rebar contract was up by 1.1%.

In wider markets, spot Brent crude oil prices were weaker and were recently quoted at $65.32 per barrel, down from $69.39 per barrel at a similar time on Tuesday morning. Oil prices are lower because the market is concerned about slack oil demand after the Organization of the Petroleum Exporting Countries trimmed its forecast for 2019 demand. The yield on US 10-year treasuries was at 3.1441% and the German 10-year bund yield was at 0.4068%.

Asian equity markets were mainly weaker on Wednesday: the ASX 200 (-1.74%) the Kospi (-0.15%), Hang Seng (-0.58%) and the CSI 300 (-0.99%), while the Nikkei was up by 0.16%.

This follows a mixed performance on Tuesday; in the United States, the Dow Jones closed down by 0.4% at 25,286.49, while in Europe, the Euro Stoxx 50 was up by 0.96% at 3,224.82. Weaker oil prices have weighed on energy equities.

The dollar index is consolidating recent gains and was recently quoted at 97.15, this after a high of 97.70 on November 12. The other major currencies are also consolidating: euro (1.1293), sterling (1.3008), the Australian dollar (0.7220) and the yen (113.90).

The yuan remains weak and was recently quoted at 6.9492, and the emerging currencies we follow are generally weak and on a back footing too.

Data already out on Wednesday showed weak Japanese preliminary third-quarter gross domestic product (GDP) which came in at -0.3%, after a 0.7% reading for the second quarter. The country’s third-quarter GDP prices were down by 0.3% too. Japan’s tertiary industrial activity dropped 1.15, after a 0.4% gain previously, while revised industrial production dropped 0.4%, but this was up from a previous reading of minus 1.1%.

Elsewhere, there was some positive Chinese data with fixed asset investment rising 5.7%, after a previous reading of 5.4% and industrial production grew 5.9% after 5.8%, but retail sales saw growth of 8.6%, after 9.2% previously.

Later there is data on German and EU GDP, consumer price index data from France, the United Kingdom and the US, as well as the European Union’s industrial production data. In addition, US Federal Open market Committee member Randal Quarles is speaking.

With the exception of tin prices that are managing to edge higher, the rest of the complex remains weak. Nickel and aluminium prices continue to drift lower, while the rest are trapped in sideways ranges. The market is waiting for some fresh news on trade. Until that is seen sentiment looks set to remain depressed and in that environment there is little need to chase prices higher. When the news flow does pick up, we expect considerable pent-up buying pressure.

With the dollar strong, the precious metals face a headwind, we wait to see how strong underlying sentiment is – it was showing some strength following the August lows.

London Metal Exchange, base metals prices, precious metals prices

Shanghai Futures Exchange, base metals prices, precious metals prices

economic data

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