MORNING VIEW: Base metals prices mixed with LME down, SHFE up, as are equities
Base metals prices on the London Metal Exchange were weaker across the board this morning, Tuesday October 13, while those on the Shanghai Futures Exchange were either unchanged or firmer, as were equities.
- Equities seem to be maneuvering for a United States democratic presidency and all the extra stimulus that might bring.
- But LME metals are not following equities this morning.
Three-month base metals prices on the LME were down across the board this morning by an average of 0.5%, led by 1% losses in tin ($18,080 per tonne) followed by 0.8% losses in nickel ($15,075 per tonne) and zinc ($2,434 per tonne). Copper was down by 0.4% at $6,712 per tonne, this followed a 0.5% loss on copper on Monday, when prices turned lower from resistance ahead of $6,800.
The most-traded base metals contracts on the Shanghai Futures Exchange were mixed between being little changed in the cases of November lead and zinc and December tin, with November aluminium leading on the upside with a 0.6% gain, November copper up by 0.2% at 51,410 yuan ($7,619) per tonne and December nickel up by 0.3%.
The precious metals complex was also mixed on Tuesday. Spot silver led on the downside with a 1.1% fall to $24.84 per oz. This was followed by spot gold, which was down by 0.6% at $1,912.20 per oz, while spot platinum was down by 0.3% at $871.60 per oz and spot palladium bucked the trend with a 0.3% rise to $2,410 per oz.
The yield on US 10-year treasuries remains upbeat this morning and was recently quoted at 0.77%, unchanged from a similar time on Monday. The move up off the recent 0.5-0.6% base suggests a more risk-on appetite.
Asia-Pacific equities were mainly firmer: the ASX 200 (+1.04%), CSI 300 (+0.02%), the Hang Seng (closed due to weather) and the Nikkei (+0.13%), while the Kospi (-0.09%) was weaker.
The US dollar index was consolidating in low ground this morning after Friday’s fall. It was recently quoted at 93.12, after being at 93.04 at a similar time on Monday. The range since early September has been 91.73-94.75.
Most other major currencies were also consolidating, with the euro at 1.1801, the Australian dollar at 0.7188, sterling at 1.3051 and the yen at 105.38.
Economic data already out on Tuesday showed China’s trade balance fall to a $37 billion surplus in September, from a $58.9 billion surplus in August. Exports rose less than they did in August, while imports were up 11.6%, compared with August’s 1.3% fall. This highlights how the Chinese recovery is pulling away from the recovery in the rest of the world.
Later, there is data on German consumer prices (CPI), United Kingdom employment, German and EU economic sentiment from Zentrum fur Europaische Wirtschaftsforschung (ZEW), with US data on the small business index and CPI.
Today’s key themes and views
With the post China Golden Week holiday rally in the base metals seemingly running out of steam this morning, we now need to see whether the rebounds are now just pausing or whether there is no longer the appetite to chase prices higher. With the US presidential election just three-weeks away and with Covid-19 spreading out of control in Europe and the US, there is still significant uncertainty as to whether there will be further widespread lockdowns that hit demand again.
But, with the market focused on China’s recovery gaining momentum, which was supported by today’s Chinese trade data, and with the potential for more stimulus in the US and the likelihood that demand rises as infrastructure projects get under way, there are also good reasons to remain bullish.
Gold prices ran into resistance on Monday and are now consolidating - stronger equities may be a headwind, but given we are probably entering a volatile period ahead of the US presidential election, demand for havens may well remain elevated.