MORNING VIEW: Base metals prices mixed, with downside bias; broader markets under pressure

Base metals prices on the London Metal Exchange and Shanghai Futures Exchange were for the most part weaker this morning, Friday January 29, with aluminium bucking the trend on both exchanges and March tin on the SHFE also higher.

  • Asian-Pacific equities and major western pre-market equity index futures were weaker this morning
  • Overall the base metals are looking heavy

Base metals
Three-month aluminium prices on the LME were up by 0.1% this morning, the rest of the complex was down by an average of 1%, led by a 1.3% fall in nickel ($17,580 per tonne) and a 1.1% fall in copper ($7,814 per tonne). Zinc, lead and tin were all down by around 0.8%

The most-traded base metals contracts on the SHFE were split with the March contracts of aluminium and tin up by 1.3% and 0.3% respectively, while the rest were down by an average of 0.9%, led by a 1.7% fall in March lead, while copper was down by 0.8% at 57,550 yuan ($8,898) per tonne.

Precious metals
Spot gold ($1,845.81 per oz) was up by 0.1% and silver ($26.45 per oz) was down by 0.1%, while platinum ($1,080 per oz) and palladium ($2,348.50 per oz) were up 0.4% and 0.2% respectively.

Wider markets
Despite nervousness in broader markets, the yield on US 10-year treasuries has climbed to 1.05% this morning, up from 1.01% at a similar time on Thursday – the recent high was at 1.18%.

Asian-Pacific equities were down across the board this morning: the Hang Seng (-0.64%), the Kospi (-3.03%), the ASX 200 (-0.64%), the CSI (-0.47%) and the Nikkei (-1.89%).

The US Dollar Index seems to be putting in an inverse head-and-shoulder pattern on the charts, which is potentially bullish. It was recently quoted at 90.68, with resistance between 90.89 and 91.02.

Most of the other major currencies were consolidating this morning: the euro (1.2111), the Australian dollar (0.7655) and sterling (1.3684); the exception was the yen (104.56) that was weakening.

Key data
Friday has a busy economic agenda. Data already out showed Japan’s housing starts fell by 9% year on year in December, after a 3.7% fall in November, and a consumer confidence reading in the country read 29.6, after 31.8 previously. French consumer spending climbed by 23% month on month in December, after an 18% fall in November, and the country’s flash reading of fourth-quarter gross domestic product (GDP) fell by 1.3%, after an 18.7% rise in the third quarter. German import prices rose by 0.6% month on month in December after a 0.5% rise in November.

Data out later includes Spanish consumer price index and GDP, German unemployment change and GDP, EU M3 money supply and private loans.

US releases include data on personal income, spending and personal consumption, employment cost index, the Chicago purchasing managers’ index, pending home sales and readings from the University of Michigan on consumer sentiment and inflation expectations.

Today’s key themes and views
With the exception of tin that remains in high ground, the rest of the base metals seem to be rolling over to the downside and if the dollar does strengthen further that might weigh on prices more.

We have been expecting a countertrend move, one seems to be getting underway now and we should get a feel for how strong underlying bullish sentiment is by seeing how far any pullback goes and how long it lasts. Overall, we remain long-term bullish toward the base metals on account of expecting more infrastructure spending, but a correction could be quite a constructive development after such long rallies.

Gold prices continue to consolidate, but prices are still above the $1,820 per oz level – in recent weeks we have seen dip-buying emerge below that level. If a broader sell-off does unfold then we would not be surprised to see gold prices initially weaken while investors dash-for-cash, before later strengthening after realized cash is then put into havens.




What to read next
The Inflation Reduction Act in the United States may ironically cause global metal market prices to rise for some metals used in electric vehicles (EVs), Fastmarkets sources said
An alarming drop in water levels in Germany’s Rhine River and other key waterways in Europe has led to massively strained logistics in shipping commodities across Europe, driving up costs and exacerbating material supply, sources told Fastmarkets
Fastmarkets is proposing a realignment of its dealer selling price for ferrous scrap machine shop turnings in Houston, effective from the September 2022 monthly settlement.
While huge investments are being made to design, manufacture and improve electric vehicles, solutions to the means of charging rapidly growing numbers of them are needed too
Participants in the US steel market were divided on the impact of a price increase from Nucor’s sheet mill group this week, with some suggesting hot-rolled coil prices could fall further while others were optimistic that announcement could halt - or even reverse — the recent downtrend
Mixed hydroxide precipitate (MHP) is increasingly emerging as the preferred nickel intermediary product for nickel sulfate producers in China and beyond
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.