MORNING VIEW: Markets quiet as traders brace for US unemployment data

Markets seem to be in the calm before the United States employment data storm this morning, Thursday April 2, with metals prices mixed, trading volume low and not much movement on equity indices for a change.

  • Asian-Pacific equity indices were mixed this morning, but pre-market western futures were firmer with the Dow Jones Industrial Average up by 1.2% as at 7 am London time.
  • Stocks in Asia initially fell following concerns that the widespread impact of Covid-19 in the US would hit demand for China exports.

Base metals
Three-month base metals prices on the London Metal Exchange were mixed this morning, with copper and zinc both up by 0.6%, at $4,835.50 per tonne and $1,870 per tonne respectively, and lead up by 0.3% at $1,705 per tonne. While the rest were all down by 0.3% – see table below for more details.

Volume on the LME was once again at a pre-crisis normal level with 5,805 lots traded as at 6.37am London time, this compares with an average last week of around 11,000 lots at a similar time of day. This suggests markets have largely adjusted to the current situation, at least for now.

The most-traded base metals contracts on the Shanghai Futures Exchange were for the most part weaker as they followed on from Wednesday’s weakness on the LME, when prices closed down by an average of 2.1%. The May zinc contract on the SHFE was the exception, it was up by 0.1%, while the rest of the complex was down by an average of 0.8%. May copper was down by 0.2% at 39,170 yuan ($5,518 per tonne).

Precious metals

Spot gold prices are still consolidating after Tuesday’s $42-per-oz decline – prices were recently quoted at $1,586.89 per oz, slightly firmer than they were at a similar time on Wednesday morning when they were around $1,586 per oz. Silver was recently quoted at $14.07 per oz, while the platinum group metals were getting some lift this morning, albeit within their consolidation ranges – they were up by an average of 1.7%, from Wednesday’s close.

Wider markets
The yield on benchmark US 10-year treasuries has eased further and was recently quoted at 0.59%, compared with 0.62% at a similar time on Wednesday.

Asian-Pacific equities were mixed this morning: the Hang Seng (+0.37%), the Kospi (+2.38%) and the CSI 300 (+0.87%) were firmer, while the Nikkei (-1.37%) and the ASX 200 (-1.98%) were weaker.

The dollar index is consolidating and was recently quoted at 99.37, this after falling from 103 to 98.20 last week.

The other major currencies we follow are also consolidating: the euro (1.0956), the Australian dollar (0.6112), sterling (1.2427) and the Japanese yen (107.18).

Key data
Thursday’s data will focus on the US initial jobless claims and the Challenger job cuts number, but other important data includes Spanish unemployment, European Union producer prices and US data on the trade balance, factory orders and natural gas storage.

Today’s key themes and views
With a broad range of markets becoming less directional and with volumes declining on the LME, it does look as though markets are now waiting for future developments. These could be unemployment data, or from company announcements of distress, but equally for the metals, announcement of more production cuts, or Chinese stimulus measures could be supportive.

Our view on gold is that while the crisis unfolds we expect there will be more demand for haven assets, especially while investors start to think about what the legacy will be of all the fiscal and monetary stimulus that has been done around the world.