MORNING VIEW: Metals mixed, equities firmer following Tuesday’s encouraging US manufacturing data

Markets were mixed this morning, Wednesday September 2, with base metals prices on the London Metal Exchange little changed, the dollar was firmer and Asian-Pacific equities, as well as pre-market major western equity index futures, were stronger too.

The main supporting factor seems to be Tuesday’s manufacturing purchasing managers’ index (PMI) data that for the most part showed robust recoveries, summed up by the JP Morgan Global Manufacturing PMI rising to 51.8 in August, from 50.6 in July, to reach the highest since November 2018.

  • Spot precious metals down across the board after the slide in the US dollar index comes to a halt.
  • Markets now likely to focus on Friday’s US employment report.

Base metals

Three-month base metals prices on the LME were up by an average of 0.1% this morning, with zinc down by 0.1%, while the rest were up between 0.1% for copper ($6,691 per tonne) and aluminium ($1,820 per tonne) and 0.3% for nickel ($15,590 per tonne).

Trading volume has been average with 5,580 lots traded as of 6.41am London time.

The most-traded base metals contracts on the Shanghai Futures Exchange were more polarized with prices ranged between minus 0.8% for October copper that was recently quoted at 52,010 yuan ($7,617) per tonne and November tin that was up by 0.6%. October aluminium and October lead were down by 0.7% and 0.2% respectively, while November nickel and October zinc were up by 0.2% and 0.5% respectively.

Precious metals

Spot precious metals prices were weaker this morning, led by a 0.7% fall in silver ($27.98 per oz), with gold ($1,964.27 per oz) down by 0.4%, platinum ($940 per oz) down by 0.3% and palladium ($2,265.60 per oz) down by 0.4%.

Wider markets
The yield on US 10-year treasuries was weaker at 0.68% this morning, this after 0.71% at a similar time on Tuesday morning.

Asian-Pacific equities were firmer this morning: the CSI 300 (+0.25%), the Hang Seng (+0.08%), the Kospi (+0.56%), the Nikkei (+0.47%) and the ASX 200 (+1.84%)

The dollar index was firmer this morning and recently quoted at 92.43, this after setting a two-year low at 91.73 on Tuesday. The 2018 trough in the dollar index was at 88.25, while the multi-decade low in 2008 was at 70.70.

With the dollar firmer, the other main currencies have eased this morning: the euro (1.1900), the Australian dollar (0.7354), the yen (106.06) and sterling (1.3362).

Key data
Economic data already out on Wednesday showed Japan’s monetary base climbed by 11.5% year on year in August, after a 9.8% rise in July; the United Kingdom’s nationwide house price index climbed by 2% month on month in August, after a 1.5% rise in July; while Germany’s retail sales dropped by 0.9% month on month in July, having been expected to rise by 0.5%.

Data out later includes the Spanish unemployment change, the European Union’s producer price index, the UK house price index as well as US releases that include the ADP non-farm employment change, factory orders, crude oil inventories and the Beige book.

In addition, various central bankers are schedule to speak, including Bank of England governor Andrew Bailey, UK monetary policy committee member Ben Broadbent and US Federal Open Market Committee members John Williams and Loretta Mester.

Today’s key themes and views
Good manufacturing data and a weaker dollar have supported the base metals recently and for the most part the upward trends remain strong, although copper is now showing some loss of momentum after Tuesday’s energetic spike higher while lead has also lost momentum since August 19.

Given the strong rises in the base metals prices in recent quarters, a lot of good news is probably already baked in and therefore consolidation and set-backs should be expected. That said, the overall trends are strong, but how much of that has been driven by the weight of money flowing into all markets and how strong is that commitment remains to be seen.

Gold prices tried higher on Monday and Tuesday, but have pulled back recently while broader markets continue to show strength and the dollar’s fall has halted for now. Expect more choppy trading in gold while the market consolidates.