MORNING VIEW: Base metals prices mainly higher on weaker dollar as Joe Biden becomes president-elect

Base metals prices on both the London Metal Exchange and Shanghai Futures Exchange were mainly stronger this morning, Monday November 9, after markets reacted positively to Joe Biden winning the US presidential election and the resulting weaker dollar.

  • China’s unwrought copper imports climbed 43% in October, year on year.
  • China total exports climbed by 11.4% in October from a year ago, while total imports rose by 4.7%

Base metals
Three-month base metals prices on the LME were for the most part firmer this morning, the exception being tin that was down by 0.5% at $18,290 per tonne. The rest were up by between 0.5% for copper ($6,984 per tonne) and nickel ($15,750 per tonne) that was up by 2.6%.

The most-traded base metals contracts on the SHFE were also generally firmer, the exception also being tin, where the January contract was down by 0.2%. The rest of the complex was up by between 0.5% for December aluminium and 2.4% for December nickel. December copper was up by 1.1% at 52,030 yuan ($7,868) per tonne.

Precious metals
The precious metals complex was mixed with spot gold ($1,958.85 per oz) up by 0.4%, silver ($25.70 per oz) up 0.50% and platinum ($900.50 per oz) up by 1%, while palladium ($2,454.50 per oz) was down by 1.5%.

Wider markets
The yield on US 10-year treasuries was recently quoted at 0.81%, suggesting risk on.

Asia-Pacific equities were stronger this morning: the ASX 200 (+1.75%), the CSI (+1.83%), the Hang Seng (+1.43%), the Nikkei (2.12%) and the Kospi (+1.27%).

The US dollar index continues to weaken and was recently quoted at 92.20, the recent low being 91.73 seen on September 1.

With the dollar weakening, the other major currencies were firmer: the yen (103.53), the Australian dollar (0.7288), the euro (1.1890) and sterling (1.3171).

Key data
Economic data already out on Monday showed Japan’s leading indicators jump to 92.9% in September, after being at 88.4% in August.

Data out later includes the German trade balance, EU Sentix investor confidence and a US loan offer survey.

In addition, there are numerous central bankers scheduled to speak including European Central Bank president Christine Legarde, Bank of England governor Andrew Bailey, UK Monetary Policy Committee member Andy Haldane and Federal Open Market Committee member Loretta Mester.

Today’s key themes and views
A relief rally seems to be under way driven by the likelihood that a Joe Biden administration is less likely to engage in trade wars and will likely stimulate the economy at a faster pace. On top of this, widespread infrastructure spending, led by China is also a positive for demand. But there is a risk that the price strength has run ahead of the fundamentals, especially given how the pandemic continues to spread at an alarming pace.

Gold prices are in the process of breaking higher, driven by the weaker dollar, but the risk-on sentiment in the broader markets may end up being a headwind for gold because it will increase the opportunity cost of holding gold.




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