MORNING VIEW: LME base metals prices mixed, but equities firmer on stimulus hopes

Base metals prices on the London Metal Exchange were mixed this morning, Thursday October 8, while equity markets were mainly upbeat because US fiscal packages may still be forthcoming.

  • US President Donald Trump changed his tune on Wednesday, from postponing stimulus talks with the Democrats to encouraging them to pass a string of single rescue packages to targeted areas.
  • Likewise, with Democratic candidate Joe Biden in the lead in US presidential election polls, markets are starting to reflect the likelihood of even more generous stimulus packages.
  • If polls start to swing more, so too are markets likely to.

Base metals
Three-month base metals prices on the LME were mixed but little changed this morning. Prices ranged between copper being down by 0.2% at $6,645 per tonne and nickel being up by 0.2% at $14,570 per tonne.

Volumes remain light with 1,324 lots traded as of 5.51am London time, compared with an average of 1,343 lots across Monday to Wednesday at a similar time.

Precious metals
After Tuesday’s heavy down day the precious metals complex rebounded yesterday, with gains averaging 1.4%, and prices were up slightly again this morning.

Spot gold was up by 0.1% at $1,888.94 per oz, silver was up by 0.3% at $23.86 per oz, platinum was unchanged at $866 per oz, while palladium was up by 0.6% at $2,362 per oz.

Wider markets
The yield on US 10-year treasuries has strengthened further this morning and was recently quoted at 0.78%, this compared with 0.75% at a similar time on Wednesday. The move up off the 0.5-0.6% base of late suggest more risk-on appetite.

The Asian-Pacific equities were mainly firmer: the ASX 200 (+1.09%), Nikkei (+0.99%) and the Kospi ($+0.37%), while the Hang Seng (+0.55%) was weaker.

Currencies
The US dollar index was consolidating this morning with a slight downward bias. It was recently quoted at 93.55, after 93.80 at a similar on Wednesday and a recent 91.73-94.75 range.

Most of the other major currencies were firmer albeit still consolidating overall: the euro (1.1772), the Australian dollar (0.7148) and sterling (1.2936), while the yen (105.95) is slightly weaker.

Key data
Economic data already out on Thursday showed Japan’s current account rose to 1.65 trillion yen ($15.6 billion) in August, from 0.96 trillion yen in July and the economic watchers sentiment for September showed less pessimism by climbing to 49.3 from 43.9. A reading above 50 shows optimism.

Later there is data on German trade and US initial jobless claims.

In addition, Bank of England Governor Andrew Bailey is scheduled to speak and the bank’s Financial Policy Committee will release a statement and their meeting minutes

Today’s key themes and views
From looking like they were rolling over to the downside, LME prices have picked up, either off their lows as in the cases of nickel, lead and zinc or are back in, or near, high ground as in the cases of copper, aluminium and tin.

The firmer tones suggest dip-buying is still a powerful force – this may be in anticipation that Chinese participants may return from the Golden Week holiday in buying mode. Any progress on US stimulus packages could also fuel rebounds in equities and that could give base metals a boost too.

The pullback in gold prices on Tuesday suggests the yellow metal is still consolidating its March-August rally. And while it does so, the path of least resistance looks to be to the downside. Nearer the US presidential election, we would expect gold to pick up more haven demand.

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