METALS MORNING VIEW 17/01: Metals prices consolidate while uncertainty, firmer dollar cap the upside

Three-month base metals prices on the London Metal Exchange exhibited mixed movements while consolidating this morning, Thursday January 17. Copper, nickel, lead and zinc were down by between 0.1% and 0.5%, while aluminium and tin prices were up by 0.3% and 0.4% respectively.

The three-month copper price was off by 0.1% at $5,973 per tonne.

Volume across the LME base metals complex was above average with 7,022 lots traded as of 6.56am London time.

Precious metals prices were mostly consolidating this morning with gold, silver and platinum off by between 0.1% and 0.2%, while palladium prices were up by 0.3% at $1,362.50 per oz – having set a fresh record at $1,372 per oz on Wednesday. Gold prices were recently quoted at $1,291.81 per oz.

In China, base metals prices on the Shanghai Futures Exchange were mostly up, the exception being tin, where the most-traded May contract of which was down by 0.2%. The rest were up by an average of 0.6%, led by a 1.3% rise in the February zinc contract, while the February copper contract was up by 0.5% at 47,390 yuan ($7,007) per tonne.

Meanwhile, spot copper prices in Changjiang were up by 0.5% at 47,340-47,480 yuan per tonne and the LME/Shanghai copper arbitrage ratio was little changed at 7.94.

In other metals in China, the May iron ore contract on the Dalian Commodity Exchange was up by 0.2% at 513.50 yuan per tonne. On the SHFE, the May steel rebar contract was up by 0.8%.

In wider markets, the spot Brent crude oil price was weaker by 0.60% at $60.92 per barrel – so prices are still consolidating after the strong rally to $62.51 per barrel on January 11, from $50.27 per barrel on December 26, 2018.

The yield on US 10-year treasuries has eased, it was recently quoted at 2.7053%. The yields on the US 2-year and 5-year treasuries remain inverted and have widened, they were recently quoted at 2.5285% and 2.5219% respectively. The German 10-year bund yield was unchanged at 0.2100%.

Asian equity markets were for the most part weaker on Thursday, the exceptions were the ASX 200 and Kospi that were up by 0.26% and 0.05% respectively. The rest were weaker: Nikkei (-0.20%), Hang Seng (-0.47%) and the CSI 300 (-0.55%).

This morning’s performance in Asia follows strength in western markets on Wednesday; in the United States, the Dow Jones Industrial Average closed up by 0.59% at 24,207.16, while in Europe, the Euro Stoxx 50 was up by 0.30% at 3,077.22.

The dollar index, at 96.22 continues to rebound, probably helped by some better than expected US fourth-quarter earnings. Sterling (1.2853) is holding up remarkably well considering all the uncertainty over the UK government’s plan for the United Kingdom’s exit from the European Union (in the process known as Brexit). The euro (1.1379) is weakening as Europe’s data shows further weakness, while the yen (108.74) and the Australian dollar (0.7153) are consolidating.

The yuan is consolidating after its recent show of strength, it was recently quoted at 6.7690. The other emerging market currencies we follow are either consolidating recent strength, or showing slight weakness – no doubt on the back of the firmer dollar.

On the economic agenda for Thursday, the main data releases to note are the Italian trade balance, EU consumer price index (CPI) and the Philadelphia Federal Index and initial jobless claims from the US. In addition, US Federal Open Market Committee member Randal Quarles is speaking.

The LME metals are split into two camps with nickel and tin trending higher, albeit consolidating this morning, while the rest are entrenched in their sideways ranges while they await further direction either from the fundamentals, or more likely from political and economic developments. On the political front the focus is US/China trade, and on the economic front it is whether the global economy slips further toward recession while the trade impasse remains.

Overall, bases seem to be in place so that should make for a good launching pad should sentiment improve, but if the economic or political situations deteriorate further then the sideways trading patterns could once again turn out to be continuation patterns on the charts that lead to further weakness and even more oversold market conditions.

Gold and silver are consolidating near recent highs and there are still enough uncertainties and risks around to provide some haven demand, but the stronger dollar may prove too strong a headwind. Platinum prices continue to struggle, which highlights how out of favor it is, while palladium prices are in a solid looking upward trend, with prices paused just below record levels.

London Metal Exchange, base metals prices, precious metals prices

London Metal Exchange, base metals prices, precious metals prices

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