METALS MORNING VIEW 18/04: Metals remain under pressure despite good Chinese data

The base metals are for the most part weaker this morning, Tuesday April 18, with three-month prices on the London Metal Exchange off an average of 0.3%, led by a 1.5% decline in lead prices to $2,205.50 per tonne. Zinc prices are down 1.1%, nickel prices are off 0.8% and copper prices are down 0.3% at $5,666 per tonne.

Aluminium prices are bucking the trend with a 1.4% rise, as are tin prices that are up 0.4%. Volume has been strong with 11,942 lots traded as of 07:16 BST.

Gold and silver prices are consolidating, down 0.3% and 0.6% respectively, with spot gold prices at $1,283.79 per oz, having been as high as $1,295.50 on Monday April 17. The PGMs are mixed with platinum prices up 1.2% and palladium prices off 0.5%.

In Shanghai this morning, base metals prices on the Shanghai Futures Exchange are for the most part weaker with tin bucking the trend with a 0.9% gain, while the rest are down an average of 1.1%, led by a 2.3% drop in lead prices. Copper prices are off 0.9% at 46,180 yuan per tonne and spot copper prices in Changjiang are down 0.3% at 46,220-46,370 yuan per tonne but the LME/Shanghai copper arb ratio has strengthened to 8.15.

In other metals in China, September iron ore futures have continued to fall, they are down 4.3% on the Dalian Commodity Exchange, while on the SHFE, steel rebar prices are down 3.4%, gold prices are off 0.6% and silver prices are down 1.1%. In international markets, spot Brent crude oil prices are down 0.6% at $55.26 per barrel and the yield on the US ten-year treasuries is little changed at 2.24%.

Equities were firmer on Monday with the Dow closing up 0.9% at 20,636, reversing some of the weakness seen at the end of last week when geopolitical concerns were running high. This morning in Asia, the Hang Seng off 0.9%, the CSI 300 is down 0.2%, the ASX 200 is off 0.9%, but the Nikkei is up 0.4% and the Kospi is up 0.1%.

The dollar index is on a back footing, trading around 100.30, the euro is consolidating around 1.0645, the yen is easier at 109.08, and the sterling is firmer at 1.2577, while the Australian dollar is weaker at 0.7553. In emerging market currencies, the yuan is treading water at 6.8883 and most of the other currencies we follow are either showing strength, or consolidating recent strength.

There was some important Chinese data out on Monday with GDP rising 6.9%, which was better than the previous reading of 6.8%, industrial production rose 7.6%, after 6.3%, fixed asset investment climbed 9.2%, having previously been up 8.9% and retail sales climbed 10.9% after 9.5% – all suggesting a continuing recovery in growth. Data out today is focused on the USA, with housing starts, building permits, industrial production and capacity utilisation – see table below for more details.

The base metals have been showing weakness in recent weeks and have so far not seen any pick-up with the shift into the seasonally strong second quarter. The lack of upside momentum in most of the metals since mid-February has increased the chance of stale long liquidation and this remains a risk. However, the Chinese data out on Monday bodes well and we do generally expect better demand and supply restraints to underpin the fundamentals for most of the metals this year, so we expect dips to remain well supported. As such, we remain quietly bullish for the base metals.

Gold prices remain strong as geopolitical tensions are running high and are likely to remain so with the countdown to the French presidential election now on, with the first round on April 23. Silver prices are following gold’s lead, platinum is looking stronger, while palladium looks a bit toppy.

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

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