MORNING VIEW: LME base metals prices, broader markets mixed

Base metals prices on the London Metal Exchange were mixed on Monday March 22, while those on the Shanghai Futures Exchange were up across the board.

  • United States 10-year treasuries yields have eased to 1.67%, from recent highs of 1.75%

Base metals
LME three-month base metals prices were mixed, with copper, aluminium and lead down by an average of 0.5%, while the rest of the metals were up by an average of 1%, led by a 1.3% gain in tin ($25,705 per tonne). Copper was down by 0.4% at $9,027.50 per tonne.

Base metals prices on the SHFE were all higher this morning, up by an average of 1.5%, led by strong gains in May zinc, June nickel and May lead that were up by 3.3%, 2.3% and 2% respectively. May copper was up by 0.3% at 66,840 yuan ($10,260) per tonne.

Precious metals
Precious metals were mostly down, led by a 2.3% decline in spot silver ($25.61 per oz), with spot gold ($1,731.77 per oz) down by 0.8%, spot platinum ($1,181.50 per oz) down by 0.9%, while spot palladium bucked the trend with a 0.6% gain to $2,647.50 per oz.

Wider markets
The yield on US 10-year treasuries has pulled back to 1.67%, from recent highs around 1.75%.

Asian-Pacific equities were mixed on Monday: the ASX 200 (+0.66%), the CSI 300 (+0.82%), the Nikkei (-2.07%), the Kospi (-0.13%) and the Hang Seng (-0.05%).

The US Dollar Index was firm this morning and was recently at 92.10 and looks well placed to challenge this year’s highs at 92.51 seen on March 9.

The other major currencies were mainly weaker: the euro (1.1876), the Australian dollar (0.7720) and sterling (1.3842), while the yen (108.75) was firmer suggesting possible haven buying.

Key data
Monday’s economic data is light and includes the European Union’s current account and US existing home sales.

In addition, there is a German Bundesbank monthly report and numerous central bankers are scheduled to speak including Bundesbank President Jens Weidmann, Federal Reserve Chairman Jerome Powell and Federal Open Market Committee members Tom Barkin, Mary Daly, Randal Quarles and Michelle Bowman.

Today’s key themes and views
The base metals are quite mixed and seem to be in holding patterns, with prices consolidating after a year of rallying. Aluminium is looking the strongest, this despite hefty stock increases, while nickel has been hit the hardest, but it is trying to rebound now.

The underlying themes with economic recovery, stimulus spending, constrained supply chains and inflation should all be bullish for commodity prices but there are potential headwinds. Mainly the rise in bond yields is making some equity valuations look expensive and that could prompt a correction in equities that in turn could prompt a sell-off in the metals.

Gold prices found some support below $1,700 per oz and got a boost in recent days, but the stronger dollar seems to be acting as a headwind.

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