MORNING VIEW: Base metals prices mixed as markets await US presidential election result

Base metals prices on both the London Metal Exchange and Shanghai Futures Exchange were mixed this morning, Monday November 2, with the short-term outlook uncertain with much of Europe moving into tighter lockdowns, while China's new five-year plans look supportive, as does the economic data out of China and Japan this morning.

  • Japan and China report stronger manufacturing purchasing managers index (PMI) data

Base metals

Three-month base metals prices on the LME were mixed this morning with tin ($17,900 per tonne) leading on the upside with a 1.1% gain and zinc ($2,540.50 per tonne) up by 0.9%, while nickel ($15,140 per tonne) and lead ($1,801.50 per tonne) were both down by 0.6%. Aluminium ($1,847.50 per tonne) was little changed and copper ($6,729 per tonne) was up by 0.2%.

The most-traded base metals contracts on the SHFE were more polarized with December aluminium up by 2.5% and December nickel down by 2.2%, December zinc and January tin were up by 0.8% and 0.7% respectively, while December lead was down by 1% and December copper was off by 0.3% at 51,030 yuan ($7,614) per tonne.

Precious metals
The precious metals complex was firmer on Monday with prices up by an average of 1.2%. The industrial precious metals, silver, platinum and palladium, led the way, while spot gold was up by 0.3% at $1,885.20 per oz.

Wider markets
The yield on US 10-year treasuries has firmed again and was recently quoted at 0.86%, which is at the higher end of its recent range, which suggests a slight pick-up in risk appetite.

Asia-Pacific equities were firmer this morning, with the ASX 200 (+0.4%), the CSI 300 (+0.54%), the Hang Seng (+1.41%), the Nikkei (+1.39%) and the Kospi (+1.46%).

The US dollar index was on the rise this morning and has broken out of the month-old downward trend; it was recently quoted at 94.16, after a low of 92.47 on October 21.

In line with the stronger dollar, the other major currencies were weaker: the yen (104.78), the Australian dollar (0.7005), the euro (1.1633) and sterling (1.2902).

Key data
Economic data already out on Monday showed China’s Caixin manufacturing PMI climb to 53.6 in October, up from 53 in September and the same data for Japan came in at 48.7 from 48 previously.

Data out later includes manufacturing PMI out across Europe and the United States, along with US construction spending and US data on loans.

Today’s key themes and views

The base metals seem to be well underpinned by the prospects for stronger demand from infrastructure spending with the bountiful liquidity in the system facilitating buy and hold strategies. Individual metals seem to be experiencing bouts of profit-taking along the way, but overall dips are expected to be well supported.

Gold prices are stuck in a sideways range. Over the long run we remain bullish, but are prepared for increased volatility around the US presidential election, especially as the dollar is rebounding too.

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