METALS MORNING VIEW 15/05: Metals firmer, Chinese financing pledge supportive

Base metals prices on the London Metal Exchange are for the most part firmer this morning, Monday May 15.

Nickel prices are down 2.5%, tin prices are little changed, while the rest are up by between 0.3% for aluminium and 0.8% for zinc prices, with three-month copper prices up 0.4% at $5,588 per tonne. Volume has been average with 6,034 lots traded as of 06:57 BST.

This follows a split day on Friday that saw lead and zinc prices down an average of 1.9%, tin prices off 0.3%, while the rest were firmer by an average of 0.5%, with three-month copper price closing at $5,568 per tonne.

Spot precious metals are up an average of 0.8% this morning, led by 1% gains in the PGMs, silver prices are up 0.8% at $16.562 per oz, while gold prices are up 0.3% at $1,231.73 per oz. This comes after a steady day on Friday when prices rose 0.3% on average.

In Shanghai this morning, lead, tin and zinc prices are weaker by 1.1%, 0.8% and 0.2%, respectively, while nickel prices are little changed, aluminium prices are up 1.1% and copper prices are up 0.6% at 45,300 yuan per tonne.

The LME/Shanghai copper arb ratio is considerably stronger at 8.19, while spot copper in Changjiang is up 0.6% at 45,130-45,280 yuan per tonne.

In other metals in China, September iron ore prices are slightly firmer, up 0.6% at 455.50 yuan per tonne on the Dalian Commodity Exchange, while on the Shanghai Futures Exchange, steel rebar prices are off 0.1%, gold prices are up 0.4% and silver prices are up 0.6%

In international markets, spot Brent crude oil prices are up 1.6% at $51.58 per barrel as some Organization of the Petroleum Exporting Countries (OPEC) members said an OPEC deal should be extended. The yield on the US ten-year treasuries is weaker at around 2.33%.

In equities on Friday, the Euro Stoxx 50 closed up 0.4%, while the Dow closed down 0.1% at 20,896. Asia this morning is mixed, with the Nikkei is off 0.1%, the Hang Seng is up 0.63%, the CSI 300 is up 0.4%, the Kospi is up 0.2%, and the ASX 200 is little changed.

The dollar index has started to show weakness again with the index at 99.10, having seen a recent high of 99.89 – for now the 2017 trend is to the downside. The euro is stronger at 1.0939, the sterling is firmer at 1.2923, as is the Australian dollar at 0.7415 and the yen is at 113.47.

In emerging market (EM) currencies, the yuan is firmer at 6.8990, while all the other EM currencies we follow are firmer too, reversing some of the weakness seen in late-April and early-May.

Chinese president Xi Jinping’s pledge of $78 billion worth of financing for infrastructure projects, implies the One Belt One Road plan is continuing and that should be long-term supportive for metals’ demand. Data out today has showed better Japanese PPI at 2.1%, up from 1.4% previously. China’s industrial production climbed 6.5%, which was lower than the 7.6% seen previously, fixed asset investment climbed 8.9%, compared with 9.2%, and retail sales growth dipped to 10.7% from 10.9%. Later there is data on the US Empire State manufacturing index, NAHB housing market Index, and TIC long term purchases. In addition, UK Prime Minister Theresa May is speaking this evening – see table below for more details.

The base metals are for the most part consolidating after recent weeks’ weakness, copper, aluminium and nickel prices are getting some lift, tin prices are stuck mid-range, while zinc and lead prices are flatter, with prices just holding above support levels. A rebound in oil and more talk of China financing major projects may be enough to halt the overall downward trends of late. For now although there is a slight upward bias, the metals remain vulnerable. We wait to see if bargain hunting gathers momentum.

Precious metals’ prices are picking up again after some significant weakness – at least in the cases of silver and platinum, while the slide in gold prices has been more routine and palladium prices have managed to hold up well. In the current climate we are not overly bullish on gold prices, but the prices pullback of late may well be enough to prompt bargain hunting, which may be enough to give prices some further lift.

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