MORNING VIEW: Markets firmer but quiet ahead of Lunar New Year break

Broader markets were generally firmer but quiet on Monday January 20, with equities in Asia mainly stronger, as were the base metals, while gold was holding up in high ground.

  • Equities in Asia are consolidating recent gains, but multi-year highs in many regional equity indices suggests sentiment is bullish overall.
  • Markets quiet ahead of the Lunar New Year holidays, which start on Friday in China.

Base metals
Three-month base metals prices on the London Metal Exchange were for the most part firmer this morning, with the base metals complex up by an average of 0.4%. Nickel was the lone metal in negative territory, while lead led the gains with a 1.3% rise to $2,005 per tonne. Copper hovered below the $6,300-per-tonne mark with a 0.4% increase to $6,293 per tonne.

Trading volume has been below average with 4,452 lots traded as at 07.07am London time.

In China, the most-traded base metals contracts on the Shanghai Futures Exchange were mixed; March lead and zinc were up by 0.3% and 1.4% respectively, while the rest were down by an average of 0.7%, with March copper down by 0.5% at 49,100 yuan ($7,157) per tonne.

The spot copper price in Changjiang was down by 0.2% at 48,810-48,890 yuan per tonne and the LME/Shanghai copper arbitrage ratio was at 7.80.

Precious metals
Despite the firmer broader markets, gold is edging higher with the spot price recently quoted at $1,561.29 per oz. Silver is firm at $18.10 per oz, as is platinum at $1,029 per oz, while palladium continues with its strong advance – it was recently quoted at $2,508.50 per oz.

Wider markets
The yield on benchmark US 10-year treasuries was recently quoted at 1.9162 % and the German 10-year bund yield was recently quoted at -0.2511%.

Asian equities were for the most part firmer this morning: the Nikkei (+0.18%), the Kospi (+0.54%), China’s CSI 300 (+0.75%) and the ASX 200 (+0.22%), while the Hang Seng (-0.82%) was weaker.

This follows a strong performance in Western markets on Friday, where in the United States, the Dow Jones Industrial Average closed up by 0.17% at 29,348.10; in Europe, the Euro Stoxx50 closed up by 0.9% at 3,808.26.

The dollar index is firmer at 97.64, this after a low around 96.20 at the start of the year, although the medium-term trend remains downward. While the dollar is firm, the other major currencies we follow are weaker: sterling (1.2976), the euro (1.1091) the yen (110.13) and the Australian dollar (0.6872).

The Chinese yuan (6.8602) is trending higher again, having ended 2019 at 6.9623.

Key data
It is a light day for economic releases on Monday. Japan’s revised industrial production dropped by 1% month on month in November 2019, but it is a choppy data set, and Germany’s producer price index climbed by 0.1%. Later there is a German Bundesbank monthly report and a Eurogroup meeting. US markets are closed in observance of Martin Luther King Day.

Today’s key themes and views

The underlying trends for copper, aluminium, zinc and tin are upward, while lead has only recently turned higher, having put in a base for most of last month. Nickel prices are trading sideways having put in a low in early December 2019. Overall it seems as though sentiment is stronger, but confidence is low, so it is likely to take more evidence that the global economy is expanding to instill more confidence.

The fact that gold prices are holding up also suggests there is still some nervousness about and that may be because there are concerns of a broader market correction given many equity indices are at record, or multi-year highs.

base metals
precious metals

macroeconomic data