MORNING VIEW: LME base metals prices mixed on combination of bargain-hunting, consolidation

Base metals prices on the London Metal Exchange were mixed but little changed this morning, Tuesday September 29, while prices on the Shanghai Futures Exchange were firmer as they caught up with Monday’s performance on the LME.

  • Last week’s pullbacks have run into dip-buying – hopes for further stimulus are buoying markets.
  • US Congress making progress in talks regarding support measures.
  • Markets might turn risk-off ahead of this evening’s first debate between US President Donald Trump and former vice president Joe Biden, the democratic candidate.


Base metals

Three-month base metals prices on the LME were all little changed this morning, ranged between being down by 0.1% for both aluminium ($1,782 per tonne) and zinc ($2,427.50 per tonne) and lead that was up by 0.2% at $1,853 per tonne. Copper was down by $1 per tonne at $6,594.50 per tonne.

Volumes traded on the LME have been light with 2,852 lots traded by 5.49am London time, compared with an average of 6,838 lots traded at a similar time across last week.

The most-traded base metals contracts on the SHFE were up across the board by an average of 1.7%, led by 2.4% and 2.5% gains in the November zinc and lead contracts respectively. This while they play catch-up with the 1.3% average gain on the LME on Monday. November copper was up by 0.3% at 51,050 yuan ($7,488) per tonne.

Precious metals

The precious metals were mainly weaker this morning, led by a 0.8% fall in spot silver to $23.49 per oz. Spot gold prices were down by 0.1% at $1,879.20 per oz, with platinum off by 0.4% at $877.50 per oz, while palladium was up by 0.2% at $2,272.50 per oz.

Wider markets
The yield on US 10-year treasuries remains rangebound – it has not been moving much in recent weeks. It was recently quoted at 0.66%, unchanged from a similar time on Monday.

Asian-Pacific equities were mainly firmer this morning: the CSI 300 (+0.48%), the Kospi (+0.78%), the Nikkei (+0.47%), the ASX 200 (-0.02%) and the Hang Seng (-0.3%).

Currencies
The US dollar index’s rebound has stalled this week, it was recently quoted at 94.23. The recent range being 92.74 to 94.75.

The other major currencies were consolidating this morning with a slight upside bias after recent weakness: the euro (1.1670), the Australian dollar (0.7080), sterling (1.2851) and the yen (105.57).

Key data

Key data out on Tuesday showed Tokyo core consumer prices (CPI) declined by 0.2% year on year in September, this after a 0.3% decline in August.

Later there is data on German and Spanish CPI and UK M4 money supply and lending. US releases include the goods trade balance, preliminary wholesale inventories, house prices and consumer confidence.

In addition, Federal Open Market Committee members John Williams, Richard Clarida, Patrick Harker and Randal Quarles are scheduled to speak.

Today’s key themes and views
The base metals’ uptrends that started off after the March lows have now lost upward momentum with individual metals now looking more mixed. Lead, nickel, zinc and tin are finding some dip-buying support, but prices are well below recent highs, while aluminium and copper have seen weakness but appear to be holding up better.

Overall, given the gains over recent months, we would not be surprised to see the sell-offs continue for a while, but we do expect good buying interest from those who have avoided chasing prices higher, but who need to restock ahead of stronger demand from infrastructure projects.

Gold prices attracted some dip-buying yesterday, but overall the trend seems to be pointing lower for now. With equities rebounding after recent weakness investors may be looking to get more risk-on again, which could be a headwind for gold. Although this evening’s US presidential debate may stir markets up again.

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