MORNING VIEW: Base metals prices looking tired again but potential $2tln relief package might change that

The base metals on the London Metal Exchange and on the Shanghai Futures Exchange were mixed this morning, Thursday January 14, with prices generally holding up in high ground but some weakness is showing up on the charts in the likes of zinc.

But reports that US President-elect Joe Biden is considering a fiscal relief package that could be as large as $2 trillion may well underpin further gains in the metals.

  • China’s copper imports slipped for the third consecutive month in December, this after high levels of imports in the first three quarters of last year
  • Market expects Biden to reveal his stimulus package on Thursday

Base metals
Three-month base metals prices on the LME were mixed this morning. Nickel once again led on the upside with a 0.8% gain to $17,830 per tonne, while zinc led on the downside with a 0.8% fall to $2,749 per tonne. Lead was off by 0.2% at $2,045 per tonne and copper was up by 0.3% at $7,992 per tonne, while aluminium and tin were little changed.

The most-traded base metals contracts on the SHFE were also mixed, with February lead up by 2.1%, March nickel up by 0.9%, while February zinc was down by 1.3%. The rest were little changed with March copper off by 0.1% at 58,800 yuan ($9,094) per tonne.

Precious metals
Spot gold was down by 0.3% this morning at $1,842.80 per oz while it consolidates after a low on Monday of $1,819.15 per oz. Spot silver was down by 0.1% at $25.27 per oz, spot platinum was up by 0.7% at $1,105 per oz, while palladium was unchanged at $2,394 per oz.

Wider markets

The yield on US 10-year treasuries has slipped and was recently quoted at 1.11%, compared with 1.12% at a similar time on Wednesday.

Asian-Pacific equities were mainly stronger this morning: the ASX 200 (+0.43%), the Kospi (+0.05%), the Nikkei (+0.85%) and the Hang Seng (+0.7%), while the CSI (-2.06%) was weaker, this despite a strong Chinese trade surplus in December, with exports up 18.1% and imports up 6.5%.

The US Dollar Index is firmer this morning at 90.43, this after 89.99 at a similar time on Wednesday and after a high on Monday at 90.73.

With the dollar firmer, the other major currencies were weaker this morning: the euro (1.2140), the Australian dollar (0.7744), sterling (1.3627) and the yen (104.08).

Key data
In addition to China’s trade data as detailed above, there is US data on import prices, initial jobless claims and natural gas storage and UK data on leading indicators.

In addition, US Federal Reserve chair Jerome Powell is scheduled to speak.

Today’s key themes and views
The rallies are again looking a bit tired across the LME metals and temporary corrections seem overdue, but if Biden unveils a much bigger than expected rescue package, which is expected to be announced today, then that could give markets another boost.

Overall, we think we are in a long-term bull market but we do think a countertrend move is somewhat overdue - but any such dip may be delayed until after the markets have had time to adjust to whatever Biden has to say.

Gold prices, having sold off earlier in the week, are now consolidating. We are now waiting to see how the market reacts to Biden’s stimulus plans. We expect dips in gold to be well supported.




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