METALS MORNING VIEW 22/11: Metals prices mixed while markets await developments

Three-month base metals prices on the London Metal Exchange continued to give mixed performances this morning, Thursday November 22.

Zinc and lead showed weakness with prices down by 0.4% and 0.3% respectively, while tin prices were up by 0.3%. The rest were little changed, with the three-month copper price up by 0.1% at $6,242 per tonne.

Volume has been below average with 4,562 lots traded as at 7.19am London time.

Gold and silver prices were both up by 0.1% this morning, with the former at $1,226.42 per oz, while the platinum group metals were up by 0.3%.

In China this morning, the January contract prices for base metals were also mixed. Copper, aluminium and lead were in positive territory and up by an average of 0.6%, with copper at 49,640 yuan ($7,155) per tonne, while zinc was off by 0.1% and nickel and tin were down by 1.5% and 1.2% respectively.

Spot copper prices in Changjiang were up by 0.4% at 49,500-49,650 yuan per tonne and the LME/Shanghai copper arbitrage ratio was unchanged at 7.95.

In other metals in China, the January iron ore contract on the Dalian Commodity Exchange was up by 1.4% at 518.50 yuan per tonne. On the SHFE, the January steel rebar contract was also up by 1.4%.

In wider markets, spot Brent crude oil prices were weaker this morning, down by 0.18% at $63.32 per barrel and significantly weaker than the $86-per-barrel level seen as recently as early October. The yield on US 10-year treasuries was weaker at 3.0655%, while the German 10-year bund yield was also weaker at 0.3670%.

Asian equity markets were similarly mixed on Thursday, with China and South Korea showing weakness – the CSI 300 and Kospi fell by 0.38% and 0.32% respectively, while other regional markets were firmer: the Nikkei (0.66%), the Hang Seng (0.32%) and the ASX 200 (0.86%).

In the United States on Wednesday, the Dow Jones closed little changed at 24,464.69 and the Nasdaq Composite was up by 0.92%, while in Europe, the Euro Stoxx 50 was up by 1.21% at 3,153.91.

The dollar index was poised in mid-ground at 96.62 and the other major currencies we follow were consolidating too: euro (1.1400), the yen (113.05), sterling (1.2780) and the Australian dollar (0.7246).

The yuan is holding in low ground at around 6.9314. Apart from the ringgit that remains weak, the other emerging market currencies we follow are either consolidating or showing strength, which is encouraging – it shows the recent stress is focused on mature markets.

With US markets closed to mark the Thanksgiving holiday, the economic agenda is light on Thursday. Data already out showed Japan’s national core consumer price index (CPI) rose 1%, which was unchanged from the previous reading. Later, the European Central Bank’s monetary policy meeting accounts are due to be published and there is data on EU consumer confidence. In addition, UK Monetary Policy Committee member Michael Saunders is speaking.

Aluminium prices appear to have found support and are edging higher, while nickel prices continue to sink – they have already this morning set fresh lows for the year at $10.985 per tonne. Tin prices are also pulling back after prices broke higher on Tuesday, suggesting the higher price levels had attracted supply. The rest of the metals are rangebound, with copper and lead looking best placed to challenge resistance, but in this climate of trade uncertainty we expect the path of least resistance to probably still be sideways. At some stage a better outlook on trade is expected to unleash considerable pent-up demand – but for now it remains a waiting game.

Gold prices have rebounded after their recent correction and are holding up well for now. With equities showing signs of stress recently there may be some pick-up in interest for haven assets that could see money rotate into gold and the other precious metals. This is especially so as there seems to be a growing view that the US Federal Reserve may pause its interest rate rises, which could lead to a weaker dollar.

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