MORNING VIEW: Base metals prices mixed regionally; cross currents flowing through broader markets

Base metals prices on the London Metal Exchange were mainly lower this morning, Monday March 29, but those on the Shanghai Futures Exchange were stronger across the board while they reacted to Friday’s LME performance.

  • Market focused on further potential fallout from troubled hedge fund after a mass liquidation on Friday
  • Ever Given ship re-floated in Suez Canal
  • United States President Joe Biden expected to announce a $3 trillion “Build Back Better” plan targeting infrastructure and climate change

Base metals
LME three-month base metals prices were for the most part lower this morning, with tin bucking the trend with a 1.2% rise to $25,600 per tonne, while the rest were down by an average of 0.3%. Copper led on the downside with a 0.6% fall to $8,899 per tonne.

The most-active base metals contracts on the SHFE were, however, stronger across the board by an average of 1.1%, led by a 2.1% rise in May tin. Tin, no doubt, stronger given the rise in unrest in Myanmar. May copper was up by 1.2% at 66,340 yuan ($10,140) per tonne. We see the strength in SHFE as a reaction to the across the board gains on the LME on Friday, when prices closed up by an average of 1.2%.

Precious metals
Precious metals prices were all down this morning with losses averaging 0.4%, with spot gold prices down by 0.3% at $1, 727.40 per oz.

Wider markets
The yield on US 10-year treasuries was at 1.64% this morning, unchanged from a similar time on Friday. The recent high was 1.75%.

Asian-Pacific equities were mixed on Monday: the CSI 300 (+0.08%), the Nikkei (+0.58%), the Kospi (-0.12%), the Hang Seng (-0.31%) and the ASX 200 (-0.36%).

Currencies
The US Dollar Index remains bullish and was recently at 92.82, little changed from the 92.80 it was at at a similar time on Friday, but near recent highs (92.95).

The other major currencies were consolidating but close to recent lows: the euro (1.1782), the yen (109.50), sterling (1.3764) and the Australian dollar (0.7629).

Key data
Monday’s data releases are focused on the United Kingdom’s money supply, mortgage approvals and lending to individuals.

In addition, US Federal Open Market Committee member Christopher Waller is scheduled to speak.

Today’s key themes and views
While aluminium continues to trend higher, the other metals are either looking weak or are consolidating off the highs. Last week we saw dip-buying into the price weakness, but except for aluminium, there has been little follow-through buying.

The underlying themes remain bullish especially if President Biden manages to push through further infrastructure stimulus plans, but prices have already performed surprisingly well over the past 12 months, suggesting a lot of the recovery news may be in the prices, but perhaps the biggest downside risk comes from outside the metals markets. If equities start to suffer then that might well drag metals down too, at least initially.

Gold prices got some lift in recent weeks, but seem to be lacking follow-through buying – the stronger dollar no doubt not helping. Out of all the precious metals, palladium looks the strongest.


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