METALS MORNING VIEW 18/02: Metals prices mostly consolidating Friday’s gains

The three-month base metals prices traded on the London Metal Exchange were mixed on the morning of Monday February 18.

Zinc prices led the decline with a 0.9% drop to $2,639 per tonne from $2,664 per tonne on Friday’s close, followed by lead prices that were down by 0.6% at $2,065 per tonne from $2,077 per tonne, and nickel prices that dropped by 0.3% to $12,380 per tonne from $12,415 per tonne. Tin prices were little change at $21,110 per tonne, while copper and aluminium prices were both up by 0.2% at $6,239 per tonne and $1,859 per tonne, from $6,224 per tonne and $1,855.50 per tonne respectively.

Volume across the complex has been high with 9,654 lots traded as at 7:58am London time.

Gold, silver and platinum prices were little changed, with gold prices at $1,321.74 per oz, compared with $1,321 per oz, while palladium continued its advance, rising 0.5% to $1,438.60 per oz, compared with $1,432 per oz on Friday.

In China, base metals prices on the Shanghai Futures Exchange were stronger across the board with prices up by an average of 1%, led by a 1.8% rise in April copper prices to 49,230 yuan ($7,273) per tonne, up from 48,350 yuan per tonne previously.

Spot copper prices in Changjiang were up by 0.7% 48,250-48,530 yuan per tonne, from 47,925-48,205 yuan per tonne and the London/Shanghai copper arbitrage ratio was at 7.89.

In other metals in China, the May iron ore contract on the Dalian Commodity Exchange was up by 0.4% at 628 yuan per tonne from 625.50 yuan per tonne on Friday. On the SHFE, the May steel rebar contract was up by 0.7% at 3,659 yuan per tonne, compared with 3,635 yuan per tonne.

In wider markets, the spot Brent crude oil price was up by 0.26% at $66.49 per barrel from $66.32 per barrel – prices have now broken above the resistance are that lay between $62 and $63.75 per barrel.

The yield on US 10-year treasuries was recently quoted at 2.6653%. The yields on the US 2-year and 5-year treasuries remain inverted and were recently quoted at 2.5162% and 2.4897% respectively. The German 10-year bund yield was recently quoted at 0.1000%.

Asian equity markets were firmer on Monday: Hang Seng (+1.60%), the CSI 300 (+3.21%), the ASX 200 (+0.39%) and the Kospi (+0.67%).

This follows a stronger performance in western markets last Friday; in the United States, the Dow Jones Industrial Average closed up by 1.74% at 25,883.25, and in Europe, the Euro Stoxx 50 closed down by 1.84% at 3,241.25.

The dollar index’s latest run higher stalled ahead of resistance at 97.70, it peaked at 97.37 on Friday and was recently quoted at 96.83. The consolidation in the dollar has given the other major currencies we follow some support: the euro (1.1304), the yen (110.58), the Australian dollar (0.7151) and sterling (1.2910).

The yuan has been trading sideways and was recently quoted at 6.7660 and most of the other emerging market currencies we follow are either on a slight backward footing or are consolidating.

The economic agenda is light today with a German Bundesbank monthly report, while some US markets are closed for Presidents’ Day.

Tin is the only base metals that is clearly in a strong uptrend, while the other metals having put in stronger performances at the start of the year are now looking less directional, with most in mid-ground. Copper prices are, however, challenging overhead resistance that lies between $6,290 per tonne and $6,394 per tonne. On balance, with the global economy showing signs of slowing down the climate is not overly bullish, although a trade deal could change that and if industry has destocked over recent quarters then any pick-up in optimism could lead to restocking.

With the exception of platinum, the rest of the precious metals are trending higher, which in the case of gold suggests investors are increasing their exposure to gold in these uncertain times.

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