MORNING VIEW: Markets mixed, but generally supported in high ground on vaccine developments

Markets were generally buoyant this morning, Tuesday November 17, following news that a second coronavirus vaccine is showing good results, which is underpinning many equity indices at or near record highs, although the base metals on the London Metal Exchange were consolidating.

  • Asian Pacific equities were mainly higher, following gains on major western equity indices on Monday…
  • …but major western equity indices are weaker this morning, suggesting some consolidation

Base metals

Three-month base metals prices on the LME were mixed, with most little changed, the exceptions being nickel that was down by 1.1% at $15,710 per tonne and tin that was up by 0.6% at $18,770 per tonne. Copper was up by 0.2% at $7,107.50 per tonne, while the rest were plus or minus a few dollars.

This comes after some strong gains on Monday, when copper, aluminium, zinc and tin saw gains of 1% or more.

Volume has been strong for a second morning, with 7,068 lots traded as of 5.59am London time, although this was down from Monday’s exceptionally high volume of 16,723 lots at a similar time.

The most-traded base metals contracts on the Shanghai Futures Exchange were more polarized with the December contracts in nickel, lead, aluminium and copper down by 2.6%, 0.6%, 0.5% and 0.1% respectively, with the latter at 53,000 yuan ($8,047) per tonne. December zinc and January tin were bucking the trend with gains of 1% and 1.2% respectively.

Precious metals
The precious metals were unchanged to weaker, with platinum prices unchanged at $925 per oz, silver and palladium down by 0.4% and 0.5% at $24.65 per oz and $2,316.20 per oz respectively, while gold was off by 0.1% at $1,887.80 per oz.

Wider markets
The yield on US 10-year treasuries has drifted lower in recent days and was recently quoted at 0.91%, this after being as high as 0.98% at one stage last week.

Asia-Pacific equities were mixed this morning: the ASX 200 (+0.21%), the Hang Seng (+0.02%), the Nikkei (+0.42%), the Kospi (-0.15%) and CSI (-0.7%).

The US dollar index is drifting lower and was recently quoted at 92.53 – support is seen between 92.13 and 91.73.

While the dollar drifts, the other major currencies have been holding up in high ground as has been the case with the Australian dollar (0.7317), the euro (1.1857) and sterling (1.3213), while the yen (104.54) is in mid-ground but strengthening.

Key data
There is a busy economic agenda on Tuesday, starting with the Italian trade balance and followed by a host of US data including retail sales, import prices, industrial production, capacity utilization, business inventories, the National Association of Home Builders (NAHB) housing market index and Treasury International Capital (TIC) long-term purchases.

In addition, there is an Organization of Petroleum Exporting Countries (OPEC) and Joint Ministerial Monitoring Committee (JMMC) meeting and numerous central bankers are scheduled to speak including Bank of England Governor Andrew Bailey, UK’s Monetary Policy Committee member Sir David Ramsden, US Federal Reserve Chairmain Jerome Powell and Federal Open Market Committee member Lael Brainard.

Today’s key themes and views

While another vaccine development is extremely welcome news, its impact on populations will still be a good few months away at best and in the meantime more countries have to resort to lockdowns.

This could once again hit demand, but equally it could disrupt supply, but more light at the end of the tunnel will also give markets something to think about and that might well lead to positions being adjusted while investors weigh up more scenarios. Overall we think this will lead to some choppy trading, especially given how strong some markets have become.

Gold is back in the sideways-to-down channel that started off the August highs. While there is still much uncertainty around, the fact lights have appeared at the end of the tunnel means an exit to the pandemic is hopefully in sight and that, combined with higher US treasury yields that raise the opportunity cost of holding gold, may be a headwind for gold.




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