METALS MORNING VIEW 24/04: Metals off to a quiet start, expect more direction later

Apart from three-month tin prices that are down 0.9% on the London Metal Exchange this morning, Monday April 24, the rest of the metals’ prices are ranged between plus and minus 0.3%, with copper prices up 0.3% at $5,652 per tonne.

Volume remains average with 6,701 lots traded as of 06:40 BST. This follows a weaker session on Friday April 21, when the base metals complex closed down 0.9%, led by a 1.7% drop in zinc prices.

Gold prices are weaker this morning on the back of the results of the first round of the French presidential election that has put Emmanuel Macron and Marine Le Pen in the run-off election on May 7. The result has led to some liquidation of haven trades. Spot gold prices are down 0.8% at $1,274.23 per oz, silver and palladium prices are down 0.4% and 0.2%, respectively, while palladium continues to buck the trend with a 1% rise to $799 per oz. This morning’s weakness in prices follows a general down day on Friday, when the precious metals closed down by an average of 0.6%.

Sentiment in China remains largely weak with the base metals on the Shanghai Futures Exchange down an average of 1.1% this morning, the exception is copper that is up 0.2% at 45,880 yuan per tonne, while the rest are down between 0.5% for aluminium and 2.4% for tin. Spot copper prices in Changjiang are up 0.1% at 45,780-45,980 yuan per tonne and the LME/Shanghai copper arb ratio was around 8.11. Last week, the arb window was open at times, which suggests support for copper prices may not be too far away.

In other metals in China, September iron ore futures remain weak with prices down 1.4% on the Dalian Commodity Exchange, while on the SHFE, steel rebar prices are off 1.3%, gold prices are down 0.2% and silver prices are off 0.6%. In international markets, spot Brent crude oil prices are up 0.6% at $52.23 per barrel and the yield on the US ten-year treasuries has climbed to 2.32% as demand for haven bonds has eased.

Equities ended last week little changed to slightly weaker with the Euro Stoxx 50 little changed while the Dow closed down 0.2% at 20,547. In Asia this morning, China’s CSI 300 is off 1.4%, while the weaker yen has given the Nikkei a boost, it is up 1.5%, the Hang Seng is up 0.1%, the ASX 200 is up 0.2% and the Kospi is up 0.3%.

The French election result has led to some fast moves and gap-openings in the currencies with the euro gapping higher to 1.0867, the yen has fallen to 110.22, the dollar index is lower at 99.07, the Australian dollar is stronger at 0.7561 and the sterling is treading water at 1.2787. In emerging market (EM) currencies, the yuan is flat at 6.8857 and most of the other EM currencies we follow are looking stronger with the peso and rand gapping higher.

The economic agenda is light, with German Ifo business climate, a Bundesbank monthly report, UK CBI industrial order expectations, Chinese leading indicators and US Federal Open Market Committee member Neel Kashkari is speaking twice – see table below for more details.

The base metals started to find some strength towards the end of last week but the buyers did not appear to be in any particular hurry, but that may have been due to uncertainty ahead of the French election. Nickel, tin, zinc and lead remain on a back footing, while copper is holding up slightly better and aluminium is for now holding on to most of its gains. With the markets looking more risk-on this morning, we wait to see if that instils some confidence into the base metals - we would expect it to.

Gold prices gapped lower in early trading, which is not surprising and given the first round results in the French election we would expect prices to pull back further for a while, although we do not think it will derail the overall up trend in gold prices. We expect silver and platinum prices to follow gold’s lead, while palladium seems capable of trading its own fundamentals – that said, given we expect a slower auto market this year, we would not be overly bullish for prices at these elevated levels.

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