MORNING VIEW: Metals give muted response to Trump’s support for Hong Kong protestors

United States President Donald Trump’s signing of bills to support Hong Kong’s protestors may undermine or delay progress in US-China trade talks; this seems to have become a headwind for equities this morning, Thursday November 28, but so far, with the exception of nickel, it has not dragged down base metals prices on the Shanghai Futures Exchange.

Most of the Asian equity markets we follow and pre-market trading in European and US equity futures have shown weakness this morning and trades for haven assets were poorer than this time on Wednesday, so all in all the fallout from Trump’s support for the protestors has not had too much impact.

  • SHFE base metals are showing strength this morning despite a mixed performance on the London Metal Exchange on Wednesday.
  • The US Federal Reserve’s Beige Book reported the US economy expanded modestly from October to mid-November.
  • US markets are closed for Thanksgiving.

Base metals

Three-month base metals prices on the LME were mixed this morning with copper, aluminium and nickel weaker, led by a 1.1% fall in nickel to $14,200 per tonne on news that some stainless steel production lines have been cut in China. Copper was down by 0.6% at $5,913 per tonne, while aluminium was down by 0.4% at $1,765 per tonne. Tin was unchanged, while lead and zinc were up by 0.6% and 0.2% respectively.

Trading volume has been average with 4,765 lots traded as at 6.58am London time.

In China, the most-traded base metals contracts on the SHFE were for the most part higher, but February nickel stood out with a 1.8% fall. Conversely January lead led on the upside with a 1.1% gain, followed by a 0.5% gain in January aluminium. January tin, zinc and copper were little changed, with copper up 0.1% at 47,320 yuan ($6,732) per tonne.

The spot copper price in Changjiang was up by 10 yuan per tonne at 47,320-47,380 yuan per tonne and the LME/Shanghai copper arbitrage ratio was unchanged at 8.

Precious metals
The precious metals were for the most part weaker this morning, with spot gold off by $0.5 per oz at $1,456.31 per oz, silver was down by 0.1% at $16.97 per oz and the platinum was down by 0.1% at $893.90 per oz. Palladium was up 0.1% at $1,830.20 per oz.

Wider markets
The spot Brent crude oil price has slipped and is down by 0.59% at $62.69 per barrel.

The yield on benchmark US 10-year treasuries has picked up and was recently quoted at 1.7671%, compared with around 1.7393% at a similar time on Wednesday morning. The German 10-year bund yield was also firmed and was recently quoted at -0.3256%, compared with -0.3800% at a similar time on Wednesday.

Asian equities were for the most part weaker this morning: the Nikkei (-0.12%), the Kospi (-0.43%), the Hang Seng (-0.16%) and China’s CSI 300 (-0.34%), while the ASX 200 (+0.2%) is firmer.

This follows gains in Western markets on Wednesday, where in the US, the Dow Jones Industrial Average closed up by 0.15% at 28,164; in Europe, the Euro Stoxx50 closed up by 0.2% at 3,712.85.

The dollar index is consolidating in high ground and was recently quoted at 98.32. The index has been choppy since early November and has been within a 97.16-to-98.45 range.

The other major currencies we follow are mixed with the euro (1.1011) and yen (109.42) consolidating just above recent lows, while the Australian dollar (0.6764) is weaker and sterling (1.2932) is poised just below recent highs.

The yuan, at 7.0318 is slightly weaker again compared with 7.0247, at a similar time on Wednesday.

Key data
Data out earlier on Thursday showed United Kingdom’s Nationwide house price index rise by 0.5%, which beat the 0.1% rise that was expected. Later there is data on German and Spanish consumer prices and on European Union M3 money supply and private loans.

Today’s key themes and views
The muted reaction in markets to Trump’s signing of the Hong Kong Human Rights and Democracy Act, has been limited to equities, which has after all been the sector most upbeat in recent weeks. Metal traders seem are being more reserved and are waiting to see if China reacts. If China does not react then we think that will bode well for a trade deal as it will suggest China is keen not to delay a deal.

Gold prices are consolidating within their three-month downward trend, but support is evident around the $1,450-per-oz level. Again we are surprised gold prices have not climbed on the Hong Kong development.

base metals
precious metals

macroeconomic data