MORNING VIEW: Base metals, broader prices mixed on cooling market sentiment

Base metals prices on the LME and the SHFE were mixed this morning, Thursday October 15, with concerns over the spread of Covid-19 and the reduced likelihood of a US stimulus package any time soon dampening optimism.

  • Governments in Europe are trying to avoid widespread lockdowns, but Covid-19 is spreading alarmingly.
  • United States 10-year treasury yields slip as traders turn more risk-off.

Base metals
Three-month base metals prices on the London Metal Exchange were mixed and mainly little changed, with nickel and zinc the main movers. Nickel was down 1.1% at $15,355 per tonne and zinc up by 0.8% at $2,441.50 per tonne. Copper was up by just $1 at $6,717 per tonne.

The most-traded base metals contracts on the Shanghai Futures Exchange were also mixed, with the main movers being December nickel, up by 0.9%, and November lead, down 0.9%. The rest were little changed with November copper off by 0.1% at 51,240 yuan ($7,622) per tonne.

Precious metals
The precious metals complex was also mixed on Thursday. Spot platinum was the main mover with prices up by 0.6% at $861 per tonne, while the rest were little changed, with gold off by $0.3 per oz at $1,898.79 per oz.

Wider markets
The yield on US 10-year treasuries has slipped and  was recently quoted at 0.71%, compared with 0.77% earlier in the week.

Asia-Pacific equities were mixed: the ASX 200 (+0.5%), CSI 300 (+0.22%), the Hang Seng (-0.9%), the Nikkei (-0.48%) and the Kospi (-0.74%).

The US dollar index was consolidating in mid-ground this morning and was most recently quoted at 93.41 – so far this week it has been in a 93.01-93.67 range.

Most other major currencies were also consolidating, with the euro at 1.1754, the Australian dollar at 0.7188, sterling at 1.3017 and the yen at 105.25.

Key data
Economic data already out on Thursday showed China’s consumer price index (CPI) climb by 1.7% in September, this after a 2.4% rise in August, while its producer price index fell 2.1%, after a 2% fall previously. Japan’s tertiary industry activity climbed by 0.8% in August, after a 0.1% rise in July.

Later, there is data on France’s CPI, the United Kingdom’s leading indicators, a Bank of England credit conditions survey and there is a mass of US data, including: Philly Fed manufacturing, initial jobless claims, Empire State manufacturing index, import prices, crude oil inventories and the Federal budget balance.

In addition there is an EU economic summit and a number of talks from central bankers including UK Monetary Policy Committee member Sir Jon Cunliffe, European Central Bank president Christine Lagarde and Federal Open Market Committee members Robert Kaplan, Randal Quarles and Neel Kashkari.

Today’s key themes and views
The base metals on the LME are consolidating after the post-Golden Week holiday rally in China, but with equities looking weaker and the likelihood of further US stimulus now delayed, we wait to see if price can hold on to these gains. Once again, lead seems to be the metal that has both struggled to rally much and to hold on what gains it saw. Overall, we would expect further consolidation, but perhaps at lower numbers.

Gold prices are stuck in a large sideways-to-lower consolidation pattern – where they have stayed since peaking in early August. Given that we are probably entering a volatile period ahead of the US presidential election, demand for havens may well remain elevated.

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