MORNING VIEW: Base metals prices boosted by dovish Fed, bullish Biden

With the exception of lead on the Shanghai Futures Exchange, base metals prices were stronger this morning, Thursday April 29, reassured that Federal Reserve would keep policy loose and because United States President Joe Biden pumped up the outlook for the US by saying the country is “ready for takeoff”.

  • Tin leapt higher on the LME on Wednesday, with the SHFE contract catching up today…
  • … Malaysia Smelting Corp (MSC) production will be severely affected until the end of 2021.

Base metals
The base metals on the London Metal Exchange were all higher this morning, up by an average of 0.6%, led once again by a 1.2% rise in three-month copper that was recently quoted at $9,970 per tonne. The rest were up between 0.3% for lead ($2,101 per tonne) and 0.9% for aluminium ($2,420.50 per tonne).

Volumes traded on the LME have been heavy; 9,114 lots had traded by 6.06am London time, compared with an average of 7,824 lots at a similar time across Monday to Wednesday.

The most-active base metals contracts on the SHFE were also stronger, the exception was June lead that was down by 0.6%, while the rest were up by an average of 2%. June tin led the advance with a 3.2% rise and June copper was up by 1.2% at 72,560 yuan ($11,188) per tonne.

Precious metals
The industrial precious metals led on the upside with palladium ($2,950.10 per oz) up by 1%, platinum ($1,226.90 per oz) up by 0.6% and silver ($26.38 per oz) up by 0.5%, while gold was up by 0.1% at $1,784.08 per oz.

Wider markets
The yield on US 10-year treasuries was little changed this morning and was recently quoted at 1.63%, this after 1.64% at a similar time on Wednesday.

Asian-Pacific equities were mainly stronger on Thursday: the ASX 200 (+0.26%), the CSI 300 (+0.59%), the Nikkei (closed) and the Hang Seng (+0.59%), while the Kospi (-0.27%) weakened.

Currencies
The US Dollar Index has resumed its downward trend and was recently quoted at 90.58, breaching Monday’s low at 90.67 and after being at 91.04 at a similar time on Wednesday.

With the dollar weaker, the other major currencies were stronger: the euro (1.2130), sterling (1.3955), the Australian dollar (0.7793) and the yen (108.67).

Key data
Key economic data out on Thursday includes Germany’s preliminary consumer price index (CPI), import prices and unemployment change, Spanish CPI and unemployment rate, the European Union’s M3 money supply and private loans, with US data on gross domestic product, GDP prices, initial jobless claims and pending home sales.

Today’s key themes and views

The recent show of strength in the LME metals continues with tin and zinc now joining copper and aluminium in pushing to new multi-year highs, with lead and nickel playing catch-up.

Our view remains the same, we see the path of least resistance remaining to the upside, but at these levels a correction can never be ruled out. We expect the catalyst for that would be a correction in the equity markets, but the market does not seem to have the appetite for that.

The fact gold prices are also consolidating, the yen is weaker than it was and bond yields are firmer than they were suggests there is less haven demand around which may be holding gold back. But given the dollar is weaker and commodities in general, including oil, are rallying strongly, gold may well follow suit, it being part of the commodity basket and with inflation expectations on the rise.

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