MORNING VIEW: Base metals prices mixed, but broader markets looking firmer

Metals prices generally seem to be consolidating this morning, Wednesday April 29, and for the most part look well placed to extend gains, but whether underlying confidence is strong enough in these uncertain times remains to be seen.

  • Asian-Pacific and pre-market major western equity indices are all positive, as are oil prices that are up around 3%.
  • Market participants likely to focus on US gross domestic product (GDP) data and the Federal Open Market Committee statement and press conference.

Base metals
Three-month base metals prices on the London Metal Exchange were mixed this morning, once again the two smaller markets of nickel ($12,260 per tonne) and tin ($15,260 per tonne) were down by 0.6% and 0.7% respectively, while the other metals were up by an average of 0.5%. Copper was up by 0.4% at $5,231 per tonne.

The most-traded base metals contracts on the Shanghai Futures Exchange were for the most part firmer this morning, with the complex up by an average of 0.4%. June lead and July tin were down by 0.7% and 0.6% respectively, while the rest were up by an average of 1%, led by a 1.7% rise in June aluminium prices. June copper was up by 0.7% at 42,610 yuan ($6,016) per tonne.

Precious metals
Spot gold prices were up by 0.5% at $1,712.87 per oz, the market dropped to a low of $1,692.75 on Tuesday, so we wait to see if today’s firmer opening runs up to challenge the high ground that runs between $1,739 and $1,747.25 per oz.

The more industrial precious metals are firmer this morning, with gains averaging 1.4%.

Wider markets
The yield on benchmark US 10-year treasuries has weakened and was recently quoted at 0.61% this morning, compared with 0.66% at a similar time on Tuesday, this seems odd given the strong background across broader markets this morning, but it may be indicating a market that is braced for poor US GDP data that is out at 1.30pm London time.

Asian-Pacific equities were stronger this morning: the Nikkei (closed), the ASX 200 (1.09%), the Hang Seng (0.18%), the Kospi (0.63%) and the China’s CSI 300 (0.32%).

The dollar index is pointing lower, it was recently quoted at 99.63, this after 100.08 at a similar time on Tuesday – again the dollar may be braced for poor economic data.

With the dollar on a back foot the other major currencies we follow were stronger: the euro (1.0853), the yen (106.53), the Australian dollar (0.6540) and sterling (1.2480).

Key data
As well as US GDP, Wednesday’s other key data includes Germany’s consumer price index, the European Union’s M3 money supply and private loans, US pending home sales and crude oil inventories.

In addition, the US Federal Open Market Committee will report its latest findings and views when it issues its statement and holds a press conference.

Today’s key themes and views
The metals seem to be fairly buoyant as they tread water – key in the weeks ahead will be to see to what extent order flows pick up while parts of economies start to reopen. The prospect of better demand and Chinese strategic stockpiling, as incentivized by local governments, should be supportive, but what happens in equity markets will also influence sentiment.

Gold prices pulled back in recent days, but the dip was short-lived with prices back above $1,700 per oz again. Our view remains unchanged: with so much uncertainty around, we expect any dips in gold will be well supported and if investors are concerned about the sustainability of equity rebounds then more money may find its way into gold.