MORNING VIEW: LME metals mixed in quiet trade with China on holiday

Metals continue to languish in high ground during morning trading on Monday June 14, with tin being the exception as it continues to push higher on strong fundamentals due to supply disruptions.

  • Broader markets generally upbeat with some, including the S&P 500 Index, near record highs.
  • US 10-year treasury yields have fallen, not on haven buying, but because the market seems more sure that central banks will remain dovish.

Base metals
London Metal Exchange three-month base metals prices were mixed on Monday morning, with copper, nickel, zinc and lead down by an average of 0.3%; copper was at $9,965.50 per tonne at 6.18am London time, while aluminium and tin were both up by 0.7% (see table).

Chinese markets were closed in observance of the Dragon Boat Festival.

Precious metals
Spot precious metals were also mixed – gold was down by 0.6%, at $1,864.71 per oz, while the more industrial precious metals were up by an average of 0.1%.

Wider markets
The yield on US 10-year treasuries has slipped back to 1.46%. A week ago, Monday June 7, it was at around 1.57%. This is the lowest it has been since March this year.

Traders seem more relaxed that the United States Federal Reserve will give the economy enough slack to show that any inflationary pressures are transitory.

Asia-Pacific equities were stronger on Monday: the Nikkei (+0.57%), the Kospi (+0.05%), the ASX 200 (+0.13%). The Hang Seng and the CSI 300 were closed.

Currencies
The US Dollar Index was holding on to last Friday’s gains on Monday morning – it was recently at 90.56. The recent range has been 89.53-90.63.

Other major currencies were weaker this morning: Sterling (1.4106), the Australian dollar (0.7703), the Japanese yen (109.74) and the euro (1.2096).

Key data
Key economic data already out on Monday showed Japan’s revised industrial production climbed by 2.9% month on month in April, after an initial reading of 2.5%.

Data on European Union industrial production and United Kingdom leading indicators is due for release later on Monday.

In addition, Bank of England governor Andrew Bailey is scheduled to speak at 2pm London time.

Today’s key themes and views
Other than tin, the other base metals were holding up well in high ground, but for the most part, there does seem to be enough overhead supply around to cap the upside. The stronger dollar is no doubt also a headwind, but the overall confidence across markets means there may well be further room on the upside, if there are no shocks to sentiment.

The background for gold is looking bullish due to the inflationary pressures and the potential for a broad-based correction, but with the broader markets still looking confident, there seems little demand for havens at present. That, combined with the firmer dollar, may keep gold on a back footing for a while.

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