METALS MORNING VIEW 22/06: Metals start European trading indecisively after a stronger Asian session

A quiet but positive start to trading on the London Metal Exchange this morning, Thursday June 22, with base metals prices up across the board with average gains of 0.2%.

Nickel and zinc prices are up 0.1%, aluminium, lead and copper prices are up 0.2%, with the latter at $5,737 per tonne, while tin prices are up 0.5% at $19,600 per tonne. Volume has been light with 4,492 lots traded as of 06:46 BST.

This follows a generally bullish day on Wednesday, led by zinc prices being up 3.4% and lead prices being up 2.5%, while nickel and copper prices were up 1%, but aluminium and tin prices closed down 1.1% and 0.4%, respectively.

Precious metals are for the most part higher with gold, silver and platinum up an average of 0.5%, with gold prices up 0.4% at $1,253.88 per tonne, while palladium prices are off 0.1%. This follows a generally positive performance on Wednesday when prices closed up an average of 0.7% – suggesting scale down buying interest into the recent price weakness.

In Shanghai this morning, base metals prices on the Shanghai Futures Exchange (SHFE) are up an average of 1.1%, led by a 2.8% rise in zinc prices, copper prices are up 1.2% at 46,050 yuan per tonne ($6,740 per tonne), while aluminium is the one bucking the trend with a 0.4% decline. Spot copper prices in Changjiang are up 1% at 45,840-45,940 yuan per tonne and the LME/Shanghai copper arb ratio is at 8.03.

Other metals in China are stronger with September iron ore prices on the Dalian Commodity Exchange up 1.8% at 433.50 yuan per tonne. On the SHFE, steel rebar prices are up 0.8%, gold prices are up 0.7% and silver prices have climbed 1%.

In international markets, spot Brent crude oil prices put in a weak performance on Wednesday and prices are down 0.2% this morning at $44.70 per barrel and the yield on the US ten-year treasuries is little changed at 2.15%.

Weaker oil prices weighed sentiment in equity markets on Wednesday with the Euro Stoxx 50 closing down 0.2% and the Dow down 0.3% at 21,410.03. Asia has not followed through with the weakness; the CSI 300 is up 1%, helped by some Chinese shares being included in MSCI indexes, the ASX 200 is up 0.8%, the Hang Seng and the Kospi are up 0.5% and the Nikkei is little changed. So a general show of confidence this morning.

The dollar index at 97.46 has fallen back into its consolidation range having looked stronger earlier in the week when it reached reach 97.87 on Tuesday. If the rebound has stalled then that could provide some support to the metals, especially to gold prices. The euro is consolidating at 1.1171, as is the Australian dollar at 0.7555, sterling remains on a back footing and the yen is firmer at 111.05.

The yuan continues with its weaker trend at 6.8324, giving back some of the gains seen in the second half of May, which came after its credit downgrade. The other emerging market currencies we follow are generally weaker too, especially the real and rand.

On the economic agenda, there is data on UK CBI industrial order expectations, EU consumer confidence and US data includes initial jobless claims, house price index, leading indicators and natural gas storage. In addition, there is an ECB economic bulletin, US Federal Open Market Committee member Jerome Powell and UK’s Monetary Policy Committee member Kristin Forbes are speaking – see table below for more details.

On Wednesday morning it looked like the firmer tone had run its course, but most of the metals shook off early weakness, especially lead and zinc prices that rallied strongly, while aluminium prices pushed lower to test support. This morning, prices were firmer across the board earlier on, but some metals have dipped into negative territory so it is turning into a bit of a mixed European start. Overall, the markets still seem to be waiting for more directional news flow, but until then and in the short term, firmer equities and SHFE prices, bode well.

The pullback in gold, silver and platinum prices and indeed palladium prices, seems to have run its course and prices are rebounding, or in the case of palladium are pushing higher again. The stall in the dollar’s rebound is possibly one feature supporting the precious metals, but without any pick-up in geopolitical or political tensions, we would not overly bullish in the short term.

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

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