MORNING VIEW: Base metals prices mixed while participants await developments, especially on US stimulus negotiations

Base metals prices on both the London Metal Exchange and Shanghai Futures Exchange were mixed, albeit with a downside bias, during morning trading on Tuesday February 2, while silver was consolidating below highs but above its recent trading range.

Silver prices spiked up to around the $30-per-oz level on Monday, before ending the day around $28.50 per oz – the metal is now looking for direction.

  • SHFE March tin contract lower for the second day despite military coup in Myanmar
  • US President Joe Biden started talks with Republicans over a Covid-19 rescue package – Biden wants $1.9 trillion dollars, the Republicans want it to be $618 billion – that is a big gap, so perhaps room for disappointment in markets

Base metals
Three-month aluminium and nickel prices on the LME were firmer by 0.2% and 0.1% at $1,963.50 per tonne and $17,890 per tonne respectively, while the rest of the complex was down by an average of 0.4%, led by a 0.8% fall in lead to $2,016.50 per tonne. Copper was down by 0.4% at $7,795 per tonne.

The most-traded base metals contracts on the SHFE were for the most part weaker, the exception was March aluminium that was a little firmer, while the rest of the complex was down by an average of 1.2%, with March copper off by 0.8% at 57,430 yuan ($8,885) per tonne.

Precious metals
While spot silver is waiting to see which way it is shoved, the other precious metals were mixed, with gold prices off by 0.1% at $1,854.97 per oz, platinum off by 0.2% at $1,118.10 per oz, while palladium was up by 1% at $2,265.70 per oz.

Wider markets
The yield on US 10-year treasuries has been consolidating; it was recently quoted at 1.08% this morning, unchanged from a similar time on Monday.

Asian-Pacific equities were up across the board this again this morning: the Hang Seng (+1.61%), the Kospi (+1.32%), the ASX 200 (+1.5%), the CSI (+1.53%) and the Nikkei (+0.97%). Tech earnings and expectations for progress on the US stimulus policy seem to be driving sentiment.

The US Dollar Index is consolidating a hair’s width below recent highs and was recently quoted at 90.95, a series of three recent peaks lie between 90.97 and 91.06. A break higher could turn out to be a headwind for the commodities.

The other major currencies were for the most part weaker and looking heavy, the exception being sterling (1.3679) that continues to consolidate: the euro (1.2069), the Australian dollar (0.7612) and the yen (104.98).

Key data
Tuesday’s economic agenda has data on UK house prices, French preliminary consumer prices (CPI), Spanish unemployment change, Italian and EU preliminary gross domestic product and US readings on economic optimism and total vehicle sales.

Today’s key themes and views
The base metals, with the exception of tin, seem to be rolling over to the downside so a countertrend move may get going and while liquidity falls ahead of the Lunar New Year holiday, trading could become more volatile. A break higher in the dollar could add downward pressure to the metals.

We said yesterday that any run-up in silver prices is likely to be an aberration and turn into a spike, so we expect increased volatility.

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