MORNING VIEW: Broad markets mixed, while metals continue to hold up

Despite fears of second waves of the Covid-19 virus, base metals prices on the London Metal Exchange were generally holding up well this morning, Monday June 22. But while prices are holding up well, they do seem to have lost upward momentum.

  • Asian-Pacific equity and pre-market major western equity index futures were mainly weaker this morning.
  • Gold prices gapped higher this morning, suggesting investors have turned more cautious.
  • Given the extent of the rebounds across asset classes in recent months, a reality check would not be surprising.

Base metals
Three-month base metals prices on the LME were up across the board this morning with gains averaging 0.3%, led by a 0.6% rise in copper ($5,845 per tonne), with the rest of the complex up between 0.1% and 0.3%. Volume has been average with 4,668 lots traded as of 6.31am London time.

The most-traded base metals contracts on the Shanghai Futures Exchange were mainly firmer this morning, the exception being August nickel that was down by 1.1%. Out of the others, July lead led on the upside with a 1.1% gain, followed by a 0.8% gain in August copper that was recently quoted at 47,550 yuan ($6,722) per tonne. The rest were up between 0.2% for August tin and 0.6% for August zinc.

Precious metals
Spot gold prices gapped higher this morning and were recently quoted at $1,752.17 per oz, up by 0.5% from Friday’s close – prices had been as high as $1,758.45 this morning. The high from mid-May was $1,765 per oz.

Spot silver prices were up by 1.7% at $17.89 per oz, with platinum ($814.10 per oz) and palladium ($1,923.50 per oz) up by 1% and 0.7% respectively.

Wider markets
The yield on the US 10-year treasuries continues to drift lower and was recently quoted at 0.69%, compared with 0.70% on Friday. The weaker yields ties in with the risk-off tone in broader markets.

Asian-Pacific equities were mainly weaker this morning: the Hang Seng (-0.85%), the Nikkei (-0.18%), China’s CSI 300 (-0.02%) and the Kospi (-0.68%), while the ASX 200 (+0.03%) was bucking the trend.

The US dollar index is consolidating after recent strength; it was recently quoted at 97.51, this after 97.37 at a similar time on Friday.

As the dollar’s rise has paused, most of the other major currencies have stopped falling and are getting some lift: the euro (1.1203), the Australian dollar (0.6869) and sterling (1.2390), although the yen (106.95) is little changed.

Key data
Monday’s economic agenda includes UK industrial order expectations from the Confederation of British Industry, Chinese leading indicators, EU consumer confidence and US existing home sales.

In addition, Germany’s Bundesbank will release its latest monthly report.

Today’s key themes and views
Base metals prices are generally consolidating with an upside bias and have been holding up well, but as we have mentioned in recent weeks, with the physical market outside of China reportedly quiet, prices may have run ahead of the fundamentals. If equities correct, then we would expect metals prices to follow.

Gold prices have started to move higher again having been stuck in a sideways range in recent weeks, the move above $1,745 per oz suggests a challenge of the May high, which seems likely if investors start to get concerned that equities have run ahead of themselves.