METALS MORNING VIEW 24/10: Base metals prices firmer across the board after China boosts liquidity

The underlying theme remains unchanged with the base metals prices continuing to oscillate within sideways trends, although some prices, such as tin and zinc, are starting to edge higher.

Sentiment in China has improved after Chinese officials have taken steps to ease credit tightness in the private sector by helping companies raise money in the capital markets.

After a down day on Tuesday October 23, the three-month base metals prices on the London Metals Exchange were up across the board this morning with gains averaging 0.7%. Zinc led on the upside with a 1.7% gain, while tin prices were the laggards with a 0.1% gain. Copper prices were up 0.8% at $6,230 per tonne.

The precious metals were unchanged to lower this morning after strong performances on Tuesday that saw the complex close up by an average of 1.3%, led by a 1.8% rise in palladium. Gold prices were recently quoted at $1,231.95 per oz, having set a high on Tuesday at $1,239.80 per oz.

In China, base metals prices on the Shanghai Futures Exchange were mixed with the December copper, January nickel and January tin contracts, down by between 0.1% and 0.2%, while the others were firmer, with the December aluminium and November lead contracts both up by 0.6% and the December zinc contract up by 2.2%. The December copper contract was recently quoted at 50,260 yuan ($7,241) per tonne.

Spot copper prices in Changjiang were down by 0.5% at 50,010-50,150 yuan per tonne and the LME/Shanghai copper arbitrage ratio is firmer at 8.07, compared with 8.03 on Tuesday.

In other metals in China, the January iron ore contract on the Dalian Commodity Exchange was up by 2% at 533 yuan per tonne. On the SHFE, the January steel rebar contract was up by 0.6%, while the December gold contract was up by 0.5% and the December silver contract was up by 1.1%.

In wider markets, spot Brent crude oil prices were weaker by 0.1% and were recently quoted at $76.23 per barrel after Saudi Arabia vowed to keep the world adequately supplied with oil. The yield on US 10-year treasuries was weaker at 3.1479%, as was the German 10-year bund yield at 0.4120%.

Asian equity markets were mixed on Wednesday: Nikkei (+0.37%), Kospi (-0.40%), the Hang Seng (-0.32%), the CSI 300 (+0.15%) and ASX200 (-0.24%). This follows a weaker performance in western markets on Tuesday; in the United States, the Dow Jones closed down by 0.5% at 25,191.43, while in Europe, the Euro Stoxx 50 was down by 1.5% at 3,140.94.

The dollar index is pushing higher again with the index at 96.12. With the dollar stronger, the other major currencies we follow are generally weaker: euro (1.1442), sterling (1.2949) and the yen (112.45), although the Australian dollar is firmer at 0.7095.

The yuan remains weak and was recently quoted at 6.9380. While the rupiah, ringgit and peso are weaker, the rupee, rand and real are firmer, which shows there is not across the board weakness and therefore alarm bells are not ringing.

The economic agenda is busy today with flash manufacturing and services purchasing managers’ index (PMI) data out in Japan, Europe and the US. In addition, there is EU data on money supply and private loans, UK data on high street lending and US data on house prices, new home sales, crude oil inventories and the Beige book. In addition, US Federal Open Market Committee members Raphael Bostic and Loretta Mester are speaking.

Tin prices are starting to trend higher on the back of supply concerns in Indonesia, while zinc prices are working higher and are well placed to challenge resistance at $2,728 per tonne. Lead prices are also working higher from mid-ground, as are copper prices, leaving nickel and aluminium prices sitting in low ground.

While the fundamentals are generally constructive, the economic background is still uncertain, so it will be interesting to see if the likes of zinc can break higher and whether that then prompts more broad based short-covering.

Palladium prices are running higher driven by investment interest and strong fundamentals, while gold prices are also firmer, which we put down to a pick-up in demand for safe-havens now that equities are starting to show signs of correcting more. Silver and platinum are following gold’s lead from a distance.

London Metal Exchange, base metals prices, precious metals prices

Shanghai Futures Exchange, base metals prices, precious metals prices

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