MORNING VIEW: Markets mixed despite stronger Chinese manufacturing data

The metals and equity indices were mixed this morning, Monday August 3, with numerous crosscurrents affecting the markets.

Data this morning showed China’s Caixin manufacturing purchasing managers’ index (PMI) climbed to 52.8 in July from 51.2 a month earlier, while Japan’s manufacturing PMI rebounded to 45.2 from 42.6 over the same comparison.

But the continuing spread of the Covid-19 in the world’s largest economy, the United States, and the difficulty the country is having passing a new stimulus package were concerns.

  • Gold set a fresh high at $1,984.60 per oz.
  • Monday is a busy day for economic data releases with manufacturing PMI out across Europe and the US.

Base metals
The London Metal Exchange three-month base metals prices were mixed this morning with nickel ($13,660 per tonne) and zinc ($2,304.50 per tonne) down by 0.6% and 0.4% respectively, while lead ($1,884 per tonne) was up by 1.1% and the rest were little changed. Copper was up by 0.2% at $6,391 per tonne.

The most-traded base metals contracts on the Shanghai Futures Exchange were also mixed this morning; September copper and aluminium and October nickel were all weaker and down by an average of 0.9%, with copper at 51,080 yuan ($7,319) per tonne, while the rest were up by an average of 1.1%, skewed by a 2.3% rise in September lead. Please see table below for more details.

Precious metals
Spot gold was recently quoted at $1,972.80 per oz, down by 0.1% from Friday’s close, silver is down by 0.3% at $24.29 per oz, while platinum was off by 0.1% at $903 per oz and palladium was up by 0.6% at $2,097.20 per oz.

Wider markets

The yield on US 10-year treasuries was at 0.54% this morning, compared with 0.53% at a similar time on Friday.

Asian-Pacific equities were mixed this morning: the Hang Seng (-0.62%), the CSI 300 (+1.57%), the Nikkei (+2.24%), the ASX 200 (-0.03%) and the Kospi (+0.07%).

The US dollar index is firmer; it started to rebound on Friday after setting a low of 92.54 and was recently quoted at 93.55.

All the main currencies have pulled back from recent highs this morning: the euro (1.1761), the Australian dollar (0.7115), the yen (105.86) and sterling (1.3075).

Key data
The economic agenda is busy on Monday. In addition to the data above, other key data already out includes Japan’s gross domestic production (GDP) for the second quarter that fell by 0.6%, this after a 0.9% fall in the first quarter. The country’s GDP price index was up by 0.9% year on year.

Key data out later includes manufacturing PMI out across Europe and the US, with additional data on US construction spending, total vehicle sales and a US loan officer survey.

Today’s key themes and views
The metals are looking quite mixed with most consolidating, but lead is looking one of the strongest, while copper is looking the weakest, although Friday’s dip in copper did attract dip-buying.

Given the extent of the rebounds in recent months, some pause for consolidation seems warranted, especially because the course of Covid-19 is still uncertain with the virus spreading at an alarming rate with confirmed cases reaching 17.8 million, as of August 2.

Gold’s brief dip on Thursday was also short-lived, with prices up again setting a fresh high at $1,984.60 per oz earlier this morning. The rebounding dollar may prompt some profit-taking after what has been a very active past few weeks. Any dip is, however, likely to be well supported.