METALS MORNING VIEW: Quiet to slightly firmer start to the week for metals prices

Base metals are for the most part firmer this morning, Monday January 9, lead and nickel prices lead with 0.6% gains, zinc prices are up 0.5%, three-month copper prices are up 0.3% at $5,613 per tonne, while tin prices and aluminium prices are down 0.4% and 0.3%, respectively.

Volume has been light with 4,834 lots traded as of 07:00 GMT.

Precious metals are split between bullion prices that are little changed, with spot gold prices at $1,173.79 per oz, while the PGMs are up with palladium prices 1.7% higher at $766.60 per oz and platinum prices that are up 0.8% at $972.40 per oz.

On Friday January 6, the base metals closed up an average of 0.7% led by a 1.4% gain in lead prices to $2,069.60 per tonne, aluminium prices closed up 1.1%, while the rest closed up between 0.1% for tin prices and 0.7% for zinc prices – copper prices closed up 0.2% at $5,595 per tonne.

In Shanghai, base metals prices are up an average of 0.5% this morning, led by a 1.2% rise in nickel prices, with zinc prices up 1.1%, lead prices up 0.6%, tin prices up 0.1% and copper prices up 0.3% at 45,560 yuan per tonne – aluminium is the only one bucking the trend with a 0.3% price decline. In Changjiang, spot copper prices are 0.4% higher at 45,360-45,480 yuan per tonne, which puts the spread between spot and March contracts at an equivalent of $12 per tonne contango, while the LME/Shanghai copper arb is at 8.11.

In other metals in China, May iron ore prices are up 4.5% on the Dalian Commodity Exchange, on the SHFE, steel rebar prices are up 0.8%, gold prices are up 0.1% and silver prices are off 0.3%. In international markets, Brent crude oil prices are little changed at $56.85 per barrel.

Equities closed firmer on Friday, the Euro Stoxx 50 was up 0.1%, the Dow closed up 0.3% at 19,963.80 – the high nudged up to 19,999.63. In Asia this morning, the markets are, if anything, firmer, the Nikkei is closed, the Hang Seng and Kospi are little changed, the CSI 300 is up 0.3% and the ASX 200 is up 0.9%.

In FX, the dollar index is rebounding again, it was recently quoted at 102.35, this despite a weaker than expected US employment report of Friday, but the report was generally thought to show a healthy economy, especially with average hourly earnings rising more than expected. The firmer dollar has halted the rebounds in other currencies with the euro at 1.0537, the sterling at 1.2173 and the yen at 117.36, while the Australian dollar is treading water at 0.7316. The yuan, having strengthened last week, is weakening again this morning with the yuan at 6.8755 – other emerging market currencies we follow are looking slightly weaker too.

Data out today shows German industrial production climbed 0.4%, which was down from the 0.7% expected, while the country’s trade balance climbed more than expected. Data out later incudes UK house prices, Italian unemployment rate, EU Sentix investor confidence, US labour market conditions and consumer credit.

Base metals prices are looking more upbeat generally – since the start of the year we have seen prices start to rebound, then consolidate and most are now looking as if they are going to edge higher again. Nickel looks the strongest, followed by lead and zinc, while copper and aluminium seem neutral and tin continues to trade in its sideways range. The stronger dollar may well be acting as a headwind and with the US presidential inauguration just eleven days away the window of opportunity to become more directional may not be that big – we expect markets to move into consolidation mode ahead of the inauguration. We expect underlying sentiment to remain mildly bullish for the base metals unless the new US administration starts off creating shock-waves.

Despite the rebound in the dollar, gold prices are holding up well – we think the stronger tone in gold prices in recent weeks is a haven move ahead of the US presidential inauguration. The PGMs, with their industrial and precious metals attributes, seem to be doing even better than gold prices.

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