METALS MORNING VIEW 16/11: Metals prices mixed while trade uncertainty dominates

Three-month base metals prices on the London Metal Exchange were either little changed or stronger on the morning of Friday November 16.

Zinc and aluminium prices were up by the most with gains of 0.6% and 0.4%% respectively, while the rest were little changed with copper down by 0.1% at $6,195 per tonne.

Volume has been above average with 6,330 lots traded as at 07.10am London time.

This morning’s performance comes after strong gains in zinc and copper on Thursday that closed up by 2.4% and 1.7% respectively – zinc boosted by strong supply/demand data from the International Lead and Zinc Study Group that showed a 305,000-tonne deficit in the first nine months of the year.

Precious metals were up across the board by an average of 0.3% this morning, with spot gold prices up by 0.1% at $1,215.55 per oz.

In China this morning, the January contracts for base metals prices were mixed with zinc and copper leading on the upside with gains of 2.5% and 0.7% respectively, with the latter at 49,520 yuan ($7,133) per tonne; nickel and tin were both down by 0.3%, while aluminium and lead were little changed.

Spot copper prices in Changjiang were up by 0.9% at 49,460-49,680 yuan per tonne and the LME/Shanghai copper arbitrage ratio was weaker at 7.99, after 8.12 on Thursday, which suggests the LME was leading the show of strength in copper.

In other metals in China, the January iron ore contract on the Dalian Commodity Exchange was up by 2.1% at 521 yuan per tonne. On the SHFE, the January steel rebar contract was off by 0.3%.

In wider markets, spot Brent crude oil prices were firmer, up by 0.84% at $67.20 per barrel. The yield on US 10-year treasuries was weaker at 3.1070%, as was the German 10-year bund yield at 0.3650%.

Asian equity markets were mixed on Friday: the Nikkei (-0.57%), the ASX 200 (-0.1%), Hang Seng (-0.04%), the CSI 300 (0.47%) and the Kospi (0.21%).

This follows mixed performances in Western markets on Thursday; in the United States, the Dow Jones closed up by 0.83% at 25,289.27, while in Europe, the Euro Stoxx 50 was down 0.47% at 3,190.31.

The dollar index is pulling back while it consolidates and was recently quoted at 96.84, this after a high of 97.70 on November 12. The other major currencies are mixed with the euro (1.1354), the yen (113.23) and the Australian dollar (0.7281) all rebounding, while sterling is consolidating at 1.2804, after Thursday’s Brexit developments saw it drop to a low of 1.2724.

The yuan is holding in low ground at around 6.9430. The other the emerging currencies we follow are mixed with the rupee, rupiah, rouble, rand and peso firmer, while the ringgit holds in low ground.

Today’s economic agenda includes key data on the European Union’s consumer price index as well as US releases that include industrial production, capacity utilization and Treasury International Capital (TIC) long-term purchases.

In the base metals camp, aluminium and nickel are the two metals under pressure, copper and lead are rangebound, while tin looks well placed to push higher and zinc has seen some upward direction too. Key will be whether overhead supply is waiting to sell into the strength. For now US/China trade uncertainty dominates, but while lack of progress on trade is dampening sentiment, the fundamentals continue to tighten. At some stage a better outlook on trade is expected to unleash considerable pent-up demand – but for now it remains a waiting game.

Gold prices are rebounding after the recent correction – the fact Tuesday’s low was above previous lows shows a series of higher lows, which looks constructive. Silver is looking the weakest of the complex, with palladium the strongest, while platinum is following gold’s lead.

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