MORNING VIEW: LME base metals prices mainly weaker, SHFE complex follows Friday’s gains in London

Base metals prices on the Shanghai Futures Exchange were up by an average of 1.1% this morning, Monday July 26, while they followed Friday’s gains on the London Metal Exchange that averaged 1.3%.

  • Chinese equities under pressure after authorities tighten regulations
  • Pre-market western equity index futures showing a weaker start

Base metals
LME three-month base metals prices were mainly weaker this morning, the exception was nickel that was up by 0.3%, while the rest were down by an average of 0.4%. Lead, zinc and tin were down by an average of 0.7%, while aluminium and copper were down by 0.1%, with copper at $9,616 per tonne. Today’s general weakness follows a strong performance on Friday when the base metals closed with gains averaging 1.3%.

The most-active base metals contracts on the SHFE were for the most part stronger this morning. The exception was September lead that was down by 0.7%, while the rest of the metals were up by an average of 1.4%, led by a 3.2% rise in August nickel. September copper was up by 1.8% at 70,820 yuan ($10,923) per tonne.

Precious metals
Spot gold prices were up by 0.2% this morning at $1,806.35 per oz, silver was up by 0.5% at $25.26 per oz, platinum was up by 0.7% at $1,066 per oz and palladium was down by 0.2% at $2,666.50 per oz.

Wider markets

The yield on US 10-year treasuries was at 1.24% this morning, down from 1.28% at a similar time on Friday.

Asia-Pacific equities were mixed on Monday: the Nikkei (+1.04%), the Kospi (-0.91%), the Hang Seng (-3.24%), the ASX 200 (little changed) and the CSI 300 (-3.43%). China’s clampdown on for-profit tutoring in core school subjects raised concerns about the stronger stance the authorities are taking in markets.

The US Dollar Index was recently at 92.88, little changed from where it was at a similar time on Friday.

The major currencies were mixed, but little changed from where they were at a similar time on Friday: the Australian dollar (0.7341), sterling (1.3748), the euro (1.1774) and the Japanese yen (110.29).

Key data
Economic data already out on Monday showed Japan’s flash purchasing managers’ index (PMI) data on manufacturing edged down to 52.2 in July, from 52.5 in June, but core consumer prices climbed by 0.1% in July, having been flat in June.

Later there is data on German Ifo business climate and US new home sales.

In addition, United Kingdom’s Monetary Policy Committee member Gertjan Vlieghe is scheduled to speak.

Monday’s key themes and views
This morning’s early gains have run into some selling; earlier on this morning, copper had broke higher out of its recent sideways range with a move to $9,665 per tonne, but the weakness in Asian equities seems to have since weighed on sentiment. Generally, the fact that so far over the summer dips have been well supported and the opportunity to see follow-through weakness has not been taken in recent weeks, suggests sentiment is not bearish – key will be whether it turns bullish again, which it seemed to be doing in recent days.

Gold prices lost upward momentum last week, but are looking a bit more upbeat this morning, no doubt supported by the weakness in Asian equities.