MORNING VIEW: LME base metals prices mainly firmer after Friday’s pullback

Base metals prices on the London Metal Exchange were mainly firmer this morning, Monday December 14, following the pullback from highs at the end of last week, but the base metals on the Shanghai Futures Exchange were mainly weaker while they followed Friday’s weakness on the LME.

  • Germany to enter a hard lockdown on Wednesday, South Korea considers raising Covid-19 restrictions to highest level.
  • United States prepares to unroll its vaccination program

Base metals
The three-month base metals prices on the LME were mainly firmer, the exception was tin that was down by 0.2%, while the rest of the complex was up by an average of 0.8%, led by a 1.5% gain in nickel to $17,600 per tonne. Copper was up by 0.5% at $7,805 per tonne – Friday’s high was $7,973.50 per tonne.

The most-traded base metals contracts on the SHFE were mainly weaker, the exception was February nickel that was up by 1.3%, while the rest were down by an average of 0.7%, with January copper off by 0.6% at 57,820 yuan ($8,831) per tonne.

Precious metals
Spot gold prices were slightly weaker this morning, down by 0.3% at $1,833.50 per oz, while silver was down by 0.1% at $23.93 per oz, but palladium ($2,328 per oz) and platinum ($1,023.30 per oz) were up by 1.2% and 0.4% respectively.

Wider markets
The yield on US 10-year treasuries was recently quoted at 0.91%, unchanged compared with where it was at a similar time on Friday.

Asia-Pacific equities were mixed this morning: the CSI (+0.92%), the ASX 200 (+0.27%), the Nikkei (+0.3%), the Hang Seng (-0.37%) and the Kospi (-0.28%).

The US dollar index was weaker this morning and was recently quoted at 90.61 – the recent low, from December 4, is 90.47.

Most of the other major currencies were strengthening: the Australian dollar (0.7564), the euro (1.2155), the yen (103.89) and sterling (1.3392).

Key data
Key economic data already out on Monday showed Japan’s industrial production for October was revised to show 4% growth, it had earlier shown 3.8% growth and it was up from 3.9% in September. Japan’s tertiary industrial activity grew by 1% month on month in October, after a 2.3% rise in September, and Germany’s wholesale price index grew by 0.1% month on month in November, after a 0.2% decline in October.

Data out later includes European Union industrial production and a German Bundesbank monthly report.

Today’s key themes and views
Despite a bout of weakness in the metals on Friday, there seems to be little appetite for a deeper correction. The weaker dollar, high hopes surrounding the vaccines and potential for more US stimulus are providing tailwinds, while the market seems able to overlook the actual damage that the spread of the pandemic is causing. While we acknowledge the strength of the trend and the bullish longer-term implications of all the infrastructure spending, we still feel prices have run ahead of the fundamentals and therefore there is a risk of a correction.

Gold’s rebound has run out of steam and given the overall positive sentiment in other markets it may struggle to trend higher. With prices below $1,840 per oz, the yellow metal is looking more vulnerable again, especially because this weakness is happening when the dollar is also weak.

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