METALS MORNING VIEW 14/12: Weak Chinese data weighs on metals prices

Disappointing Chinese economic data has weighed on the three-month base metals prices on the London Metal Exchange this morning, Friday December 14, with all the metals in negative territory and showing average losses of 0.4%.

The three-month zinc price led the way with a drop of 1%, copper was off by 0.5% at $6,121 per tonne, while the rest were off by between 0.1% and 0.3%.

Volume across the complex has been above average with 6,627 lots traded as at 7.41am London time.

The precious metals were also weaker with average losses of 0.6%; gold was down by 0.4% at $1,237.47 per oz, silver and palladium were off by 0.8% and 0.9% respectively and platinum was down by 0.2%.

In China this morning, the base metals prices on the Shanghai Futures Exchange were mainly weaker, led by a 1.5% drop in zinc prices, followed by 0.6% falls in January lead and February copper prices, with the latter recently quoted at 48,890 yuan ($7,106) per tonne. The rest were either side of unchanged.

Spot copper prices in Changjiang were down by 0.3% at 49,070-49,190 yuan per tonne and the LME/Shanghai copper arbitrage ratio was firmer at 7.99, after 7.97 on Thursday.

In other metals in China, the May iron ore contract on the Dalian Commodity Exchange was up by 1.3% at 482 yuan per tonne. On the SHFE, the May steel rebar contract was up by 1.7%.

In wider markets, spot Brent crude oil prices were down by 0.86% at $61.12 per barrel. The yield on US 10-year treasuries has stopped rising and was recently quoted at 2.8872%, but the yields on the US 2-year and 5-year treasuries remain inverted at 2.7414% and 2.7309% respectively. The German 10-year bund yield was also weaker at 0.2635%.

Asian equity markets were showing weakness on Friday: the Nikkei (-2.02%), the Kospi (-1.25%), the ASX 200 (-1.05%), the CSI 300 (-1.67%) and the Hang Seng (-1.66%).

This morning’s performance follows a stronger performance in western markets on Thursday; in the United States, the Dow Jones Industrial Average closed up by 0.29% at 24,597.38, while in Europe, the Euro Stoxx 50 was up by 0.14% at 3,112.17.

The dollar index is firmer but in mid-range and was recently quoted at 97.17. The other major currencies we follow were weaker: the euro (1.1358), the Australian dollar (0.7180), the yen (113.56) and sterling (1.2620).

The yuan was also weaker this morning and was recently quoted at 6.8937. The emerging currencies we follow were either unchanged, or showing weakness.

The economic agenda is busy on Friday; data out already shows general weakness from China, but a slightly firmer performance in Japan where the flash manufacturing purchasing manager’s index (PMI) climbed to 52.4 from 52.2 and industrial production was steady at 2.9%. In China, fixed asset investment climbed 5.9% in November, down from 5.7% previously; industrial production grew by 5.4%, against a 5.9% rise previously; retail sales grew 8.1%, down from 8.6% previously, while the unemployment rate dipped to 4.8% from 4.9%.

Later there is data on flash manufacturing and services PMI across Europe and the US. US data includes retail sales, industrial production, capacity utilization, leading indicators and business inventories.

While copper and tin prices have been firmer in recent days, the other metals have been either heading lower or been flat in low ground, but this morning all metals are under pressure and with the exception of tin, they look vulnerable. We said earlier in the week there may be a race on between whether the trade dispute is resolved before the global economic data deteriorates to the extent that it also becomes a negative factor too – today’s Chinese data highlights that weaker economic data is becoming more of a factor.

Gold’s rebound has run out of steam and even with today’s risk-off momentum is failing to provide support, suggesting the firmer dollar is dominating again. Silver and platinum prices are following, while palladium, that set a fresh record high on Thursday at $1,268.50 per oz, is pulling back this morning. Palladium, however, is in a league of its own compared with the other base and precious metals.

London Metal Exchange, base metals prices, precious metals prices

Shanghai Futures Exchange, base metals prices, precious metals prices

economic data