MORNING VIEW: Base metals prices consolidate after Thursday’s dip-buying

Base metals prices on the London Metal Exchange were mixed but little changed this morning, Friday September 25, this after once again running into dip-buying on Thursday.

  • A late rally in US equities on Thursday lent support to broader markets.
  • US Congress is working on a $2.2 trillion stimulus package that could be voted on next week.
  • Asian-Pacific equities were for the most part stronger this morning.

Base metals
Three-month base metals prices on the LME were up by an average of 0.1% this morning, with nickel and tin the main movers that were both up by 0.5% at $14,450 and $17,555 per tonne respectively, followed by a 0.3% fall in lead ($1,865 per tonne). The rest were little changed with copper up by 0.1% at $6,584 per tonne.

Volumes traded on the LME have been average with 5,081 lots traded by 5.52am London time, compared with 9,402 lots at a similar time on Thursday.

The most-traded base metals contracts on the Shanghai Futures Exchange were mixed but down by an average of 0.4%, led by a 1.4% fall in November lead and a 1% fall in November tin, while December nickel led on the upside with a 0.7% gain. November copper was up by 0.1% at 50,900 yuan ($7,456) per tonne.

Precious metals
Like the base metals, the precious metals ran into dip-buying on Thursday and prices were up across the board this morning by an average of 0.7%. But that was skewed by a 1.9% rise in platinum ($862 per oz), while the rest were up between 0.2 and 0.3%, with gold up 0.3% at $1,872.65 per oz, this after yesterday’s low of $1,848.90 per oz.

Wider markets
The yield on US 10-year treasuries remains rangebound – it has not been moving much in recent weeks. It was recently quoted at 0.67%, unchanged from a similar time on Thursday.

Asian-Pacific equities were mainly stronger this morning: the CSI 300 (+0.14%), the Hang Seng (-0.09%), the Kospi (+0.56%), the ASX 200 (+1.31%) and the Nikkei (+0.56%).

The dollar index started to rebound strongly on Monday and that continued into Thursday – this morning it is consolidating and was recently quoted at 94.31. The range this week being 92.74 to 94.60.

The other major currencies were also consolidating after recent weakness this morning: the euro (1.1671), the Australian dollar (0.7065), sterling (1.2762) and the yen (105.36).

Key data

Key data out Friday showed the United Kingdom’s GfK consumer confidence improved to -25 in September, from -27 in August, and Japan’s services producer price index rose 1% in August, after a 1.1% rise in July.

Later there is data on UK public sector net borrowing, European Union M3 money supply and private loans and US data on durable goods orders.

In addition, the Bank of England releases its quarterly report today and Federal Open Market Committee member John Williams is scheduled to speak.

Today’s key themes and views

Once again the dips attracted buying, so the correction in prices seems to be happening in a “two-steps-down, one-step-up” pattern. Overall, given the gains over recent months, we would not be surprised to see the sell-offs continue for a while, but we do expect good buying interest from those who have avoided chasing prices higher, but who need to restock ahead of stronger demand from infrastructure projects.

Likewise in gold, now that prices have broken lower we would not be surprised for the correction to run further for a while, but we would then expect a secondary reaction to the upside while money rotates out of equities and into havens.

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