METALS MORNING VIEW 26/03: Metals remain under pressure, while other markets rebound

Base metals prices on the London Metal Exchange are down across the board by an average of 0.5% this morning, Monday March 26, led by a 1.1% fall in copper to $6,577 per tonne.

Volume has been high with 12,433 lots traded as of 07:18 am London time.

In precious metals, gold prices are off by 0.2% at $1,344.89 per oz, while silver and platinum prices are little changed and palladium prices are up by 0.4%.

On the Shanghai Futures Exchange this morning, base metals prices are down by an average of 1.2%, led by a 2.7% fall in nickel prices and a 2.1% fall in copper prices to 49,210 yuan ($7,792) per tonne. The one metal bucking the trend is zinc, where prices are up by 0.1%, which may well mean bargain hunting is starting to be seen in zinc, which has been one of the strongest metals over the past nine months.

Spot copper prices in Changjiang are down by 1.6% at 48,880-49,160 yuan per tonne and the LME/Shanghai copper arbitrage ratio is at 7.48.

In other metals in China, iron ore prices are down by 1.8% at 439.50 yuan per tonne on the Dalian Commodity Exchange. On the SHFE, steel rebar prices are down by 3.1%, while gold and silver prices are up by 0.6% and 0.2% respectively.

In wider markets, spot Brent crude oil prices are holding on to gains with prices recently quoted at $70.27 per barrel, this as geopolitical risks rise in the Middle East. The yield on US 10-year treasuries is at 2.84%, while the German 10-year bund yield is at 0.53%.

Equity markets in Asia are mixed this morning: CSI 300 (-1.82%), ASX 200 (-0.52%), Hang Seng (-0.54%), Kospi (+0.84%) and Nikkei (+0.53%). This follows weakness in western markets on Friday, where in the United States the Dow Jones closed down by 1.77% at 23,533.20, and in Europe where the Euro Stoxx 50 closed down by 1.5% at 3,298.07.

The dollar index at 89.44 is looking weaker again as prices test the bottom of the recent sideways trading range. Sterling at 1.4167 is firmer, as is the yen at 105.05, while the euro at 1.2366 is flat-to-firmer and the Australian dollar at 0.7740 is on a back footing. The yuan is looking firmer at 6.3067, while the emerging market currencies we follow are mixed with the rand, peso and ringgit showing strength, while the rupiah, rupee and real are showing weakness.

There is little economic data out today, although there are numerous central bankers giving speeches including Bundesbank President Jens Weidmann and US Federal Open Market Committee (FOMC) members William Dudley, Loretta Mesters and Randal Quarles.

The corrections in the base metals continue – tin and lead prices appear to have found some support, while the others are still looking weak. Concerns over a trade war are no doubt weighing on sentiment as is recent economic data, including the flash purchasing managers’ index (PMI) data. This morning there is some positive spin on the trade disputes, which is giving equity markets some cheer, so we wait to see if that flows into the metals. We see the pullbacks on metals prices as providing another buying opportunity, but how the trade issues pans out will be all important.

The pullback in gold prices in recent weeks ran into buying on March 25 (the day after the FOMC rate decision) and prices have rebounded strongly. The potential fallout from a trade war as well as increased geopolitical tensions are helping fuel the rally. Silver prices are following gold, but the platinum group metals are under pressure in line with the industrial metals.

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

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