METALS MORNING VIEW 15/01: Strong start to the week across most of the metals

Base metals prices on the London Metal Exchange are stronger across the board this morning, Monday January 15, with the complex up by an average of 1.2%. Copper ($7,248 per tonne) and nickel ($12,905 per tonne) lead the advance with rises of 1.9%, while tin lags behind with a 0.1% gain to $20,300 per tonne.

Volume has been high with 13,854 lots traded, with 6,586 lots of that being copper.

The precious metals are also firmer this morning with the complex up by an average of 0.8%, led by a 1.3% rise in palladium to $1,133.60 per oz, which is a fresh record high, while gains in gold (0.3%), silver (0.9%) and platinum (0.9%) show prices extending their rebounds and looking strong. A weaker dollar and general strength across oil and the base metals seems to point to a pick-up in interest in commodity baskets.

On the Shanghai Futures Exchange today, base metals prices are for the most part stronger with copper prices leading the way with a 0.6% gain to 54,990 yuan ($8,512) per tonne, zinc and nickel prices are up by 0.4%, aluminium are prices up by 0.1%, while lead and tin are bucking the trend with falls of 0.5% and 0.3% respectively. Spot copper prices in Changjiang are down by 0.1% at 54,220-54,380 yuan per tonne, the weakness in the spot and gains in the futures suggesting prices have rallied since the spot price was fixed. The LME/Shanghai copper arbitrage ratio has dropped to 7.59 up from 7.65 on Friday.

In other metals in China, iron ore prices are down by 2% at 536.50 yuan per tonne on the Dalian Commodity Exchange. On the SHFE, steel rebar prices are down by 0.1%, while gold and silver prices are firmer by 0.3% and 1.2% respectively.

In wider markets, spot Brent crude oil prices remain strong at $69.75 per barrel, the yield on US 10-year treasuries remains firm at 2.55%, and the German 10-year bund yield is at 0.51%.

Equities in Asia are mainly positive today: Kospi (0.29%), Nikkei (0.26%), ASX 200 (0.12%) and CSI 300 (0.01%), while the Hang Seng is off by 0.33%. This follows a firmer performance in western markets on Friday, where in the United States the Dow Jones closed up by 0.89% at 25,803.19, and in Europe where the Euro Stoxx 50 closed up by 0.48% at 3,612.61.

The dollar index fell sharply on Friday and is weaker again this morning having been down to 90.62 - this has taken prices below the September 2017 low at 91.01 and thereby means the 2017 downward trend is continuing into 2018. On the back of dollar weakness the other currencies are stronger: euro (1.2211), sterling (1.3754), yen (110.80) and the Australian dollar (0.7944). The yuan has broken through resistance at 6.4345, it has been to 6.4175 this morning, the strongest it has been since December 2015. Most of the emerging currencies we follow are stronger too, other than the South African rand that is consolidating recent strength.

The economic agenda is light today with EU trade balance, US banks are closed for Martin Luther King Jnr Day and UK’s Monetary Policy Committee member Silvana Tenreyro is speaking.

Base metals prices are on the rise again, it now seems as though the New Year slide in prices has abated and the stronger tone that got underway in the second half of December is resuming. Zinc is leading the advance into fresh multi-year highs, followed closely by nickel prices, while the rest look well placed to challenge former highs. For now, we remain quietly bullish for the base metals complex and see the longer-term outlook as being positive, and traders may well continue to front run that. We expect dips to remain well supported - as seems to have been the case in recent days.

The precious metals prices are rallying strongly, palladium is forging ahead setting fresh record highs driven by fundamentals, while the strong rebounds in gold, silver and platinum, suggests bullish sentiment is gaining momentum. With precious, base and oil prices performing well, it may be that commodities are back in vogue again with investors.

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

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