MORNING VIEW: Base, precious metals prices up across the board with commodities in the driving seat

Base metals prices on the London Metal Exchange and Shanghai Futures Exchange were up significantly across the board this morning, Monday February 22, with all base metals on the LME setting fresh multi- month or year highs.

Relief that vaccine programmes are being rolled out across many countries to underpin economic recovery, along with the knowledge that past and future stimulus packages will be getting to work in the real economy, are providing strong tailwinds. And while there are potential headwinds, such as the semiconductor shortage and the impact of stronger bond yields, these are not yet standing in the way of commodities – although equities are looking more nervous and that could affect the metals.

  • Asian-Pacific equities and major pre-market western equity index futures were mainly weaker this morning
  • United States 10-year treasury yields continue to climb

Base metals
LME three-month base metals prices were up this morning by an average of 1.3%, led by a 3% rise in tin ($26,855 per tonne), followed by a 2.4% rise in copper ($9,155 per tonne).

LME volume as of 6.59am London time was super-high at 23,972 lots, compared with a more normal volume at a similar time of day of around 6,000 lots – but volume has been strong since China returned from holiday on Thursday last week.

The most-traded base metals contracts on the SHFE were up by an impressive average of 4.1%, again led by a 8.7% rise in April tin, followed by a 6% rise in April copper that was recently quoted at 67,370 yuan ($10,433) per tonne.

Precious metals
Despite stronger bond yields, spot gold prices have started to rebound off recent lows and were up by 0.4% this morning at $1,790.96 per oz. The rest of the precious metals were also firmer, with prices up by an average of 0.9%.

Wider markets
The yield on US 10-year treasuries was firmer again on Monday and was recently quoted at 1.37%, up from 1.31% at a similar time on Friday.

Asian-Pacific equities were mainly weaker this morning: the Hang Seng (-0.91%), the ASX 200 (-0.19%), the CSI 300 (-3.14%) and the Kospi (0.9%), while the Nikkei (+0.46%) was bucking the trend.

Currencies
The US Dollar Index’s is firmer this morning, but has become more rangebound. It was recently quoted at 90.47 and the range this year has been between a low of 89.21 and a high of 91.60.

The other major currencies were mixed this morning: the euro (1.2110) is consolidating, sterling (1.3984) is in relatively high ground, the Australian dollar (0.7865) is benefiting from being a commodity currency and the yen (105.80) is weaker.

Key data
Monday’s economic agenda is fairly light, with German Ifo business climate and a Bundesbank monthly report, with US data on leading indicators.

Today’s key themes and views
The fact all the base metals are forging ahead this morning paints its own picture and supports our view that the markets are focused on the nearby a Covid-19 recovery, but the upturn is also supported by the huge underlying long-term electrification theme. Nonetheless, we should expect dips along the way and rising bond yields may be a trigger for some to pause for thought.

Gold prices are seeing some uplift, with the commodity sector on the rise and with gold prices having sold off recently. And with some concerned that rising bond yields may upset confidence in equities, maybe gold now offers something of a cheaper haven, especially given more talk of inflation.


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