METALS MORNING VIEW 17/04: Chinese data boosts risk appetite, metals consolidate from recent gains

Base metals prices had a strong start to the trading week after a solid close on Monday April 16. Two metals dominated the headlines yesterday: the London Metal Exchange’s three-month aluminium price continued its vertical surge, while nickel closed above $14,000 per tonne amid growing concerns that the United States could implement additional sanctions on Russia.

But overnight news suggests that geopolitical tensions have cooled after US President Donald Trump halted plans for a fresh round of sanctions on Russia over its support for the Syrian government following an alleged chemical attack in the Syrian city of Douma on April 7.

This morning, the LME’s three-month nickel price has nudged lower - down by 0.2% - while aluminium remains well bid, up by 0.3%. The rest of the complex is consolidating after recent gains, at a slightly lower than average volume of 6,096 lots as of 06.44am London time. Tin and zinc are up by 0.4% and 0.1% respectively, copper is unchanged and lead is down by 0.1%.

But any downside bias in the base metals complex should be limited following the release of generally positive economic data out of China earlier this morning. The country’s economy grew 6.8% year on year in the first quarter of 2018, in line with market consensus, while its fixed asset investment rose 7.5% over the same period. China’s industrial production reading, however, was slightly disappointing with an increase of 6% - below an expected rise of 6.4%.

In precious metals, gains were seen in platinum and palladium prices due to their industrial applications. Both metals are up by 0.4% at $930.50 per oz and $1,005.60 per oz respectively. Movement in gold and silver prices remains limited with demand for haven-assets greatly diminished due to the cooling geopolitical tensions in the Middle East. That said, the weak dollar index is keeping a floor under the precious metals complex as a whole.

Given the positive macroeconomic backdrop, base metals traded on the Shanghai Futures Exchange are all up, with the complex recording an average gain of 1.1%. Aluminium leads the way with an increase of 1.7%, followed by tin (+1.2%) and copper (+1.1%). SHFE rebar prices are also firmer, up by 0.5% at 3,419 yuan ($544) per tonne, while gold and silver prices are little changed.

The economic agenda remains fairly busy for the rest of the day, key employment data from the United Kingdom including the average earnings index, claimant count and unemployment rate is due. Data of note from the US includes building permits, housing starts, capacity utilization rate, and industrial production. In addition, US Federal Open Market Committee members John Williams, Randal Quarles and Raphael Bostic are speaking.

Investors can take comfort from the robust Chinese economic growth data. As risk sentiment continues to improve, this should allow most of the base metals to remain well bid and consolidate their recent gains. The exception being sanction-hit aluminium which may remain volatile.

Easing tensions in the Middle East and toned-down trade friction between the US and China should provide the market with much-needed confidence and certainty that global concerted growth is still very much in store. Meanwhile, gold and silver have taken a wait-and-see approach, but prices should remain well supported by the weaker dollar index.

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

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