MORNING VIEW: Base metals prices mixed despite encouraging Chinese manufacturing data

Base metals prices and Asian-Pacific equities were mixed this morning, Wednesday September 30, although pre-market western equity index futures were weaker following a confrontational and not very presidential first debate between US President Donald Trump and former Vice President Joe Biden, the democratic candidate.

  • China’s official and Caixin manufacturing purchasing managers’ indices (PMI) were both above the 50 divide at 51.5 and 53 respectively in September – thereby showing manufacturing was expanding.

Base metals
Three-month base metals prices on the London Metal Exchange were for the most part slightly weaker this morning, the exception was tin that was up by 1.3% at $17,655 per tonne, while the rest were down by an average of 0.2%. Copper was down by 0.3% at $6,588.50 per tonne.

Volumes traded on the LME were average with 4,985 lots traded by 5.37am London time, compared with an average of 6,838 lots traded at a similar time across last week.

The most-traded base metals contracts on the Shanghai Futures Exchange were also for the most part weaker this morning, the two exceptions were December tin that was up by 1.7% and November lead that was up by 0.2%. The rest of the complex was down by an average of 0.3%, led by a 0.8% fall in December nickel. November copper was down by 0.1% at 51,000 yuan ($7,478) per tonne.

Precious metals
The precious metals were also mainly weaker this morning, led by a 1.4% fall in spot silver to $23.92 per oz. Spot gold prices were down by 0.4% at $1,891.77 per oz, with platinum off by 0.6% at $882.50 per oz, while palladium was up by 0.6% at $2,327.70 per oz.

Despite most prices being lower this morning compared with last night’s closes, the complex was up by an average of 1.6% on Tuesday, so gold, silver and platinum seem to be consolidating.

Wider markets

The yield on US 10-year treasuries has edged lower; it was recently quoted at 0.65%, this compared with 0.66% at a similar time on Tuesday.

Asian-Pacific equities were mixed this morning: the CSI 300 (+0.5%), the Hang Seng (+1.15%), the Kospi (+0.86%), the Nikkei (-1.08%) and the ASX 200 (-1.81%).

The US dollar index’s rebound has stalled this week; it was recently quoted at 93.94, this after 94.23 at a similar time on Tuesday. The recent range being 92.74 to 94.75.

The other major currencies were consolidating this morning with a slight upside bias after recent weakness: the euro (1.1732), the Australian dollar (0.7111), sterling (1.2838) and the yen (105.47).

Key data
Key data already out on Wednesday, in addition to the data already mention, showed Japan’s preliminary industrial production climbed by 1.7% month on month in August - it was expected to rise by 1.5%. Japan’s retail sales fell by 1.9% year on year in August, following a 2.9% decline in July, with housing starts falling by 9.1% year on year last month, after an 11.4% fall previously. China’s Caixin non-manufacturing PMI climbed to 55.9 in September, after 55.2 in August.

Later there is a host of data out across Europe. Notable releases include German retail sales and unemployment change, the United Kingdom’s final gross domestic product (GDP) and French and Italian consumer price index (CPI) – see table below for more details.

US data includes ADP non-farm employment change, final GDP, GDP price index, Chicago PMI, pending home sales and crude oil inventories.

In addition, there are numerous central bankers scheduled to speak including European Central Bank President Christine Lagarde, UK Monetary Policy Committee member Andrew Haldane and Federal Open Market Committee members Neel Kashkari and Michelle Bowman.

Today’s key themes and views
The upward trends in the base metals on the LME have stalled with lead and nickel trending lower, while the others seemed to be rolling over to the downside, but trading has been more choppy because dips are attracting bargain-hunting.

Overall, given the gains over recent months we would not be surprised to see the sell-offs continue for a while as risk-off picks up during China’s Gold Week holiday that starts tomorrow and ahead of the US -presidential election. But we do expect good buying interest to return before too long once actual demand from infrastructure projects gathers pace and planning stages move toward construction.

Gold prices attracted some dip-buying on Monday and saw follow-through buying on Tuesday, but prices are consolidating this morning. Having broken lower last week, we would not be surprised to see prices consolidate at lower numbers, but overall given there is still so much uncertainty on the economic and political fronts, we do not think the overall uptrend has finished yet.

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