MORNING VIEW: Metals prices consolidate after recent strength, broader markets mixed

Base metals prices on the London Metal Exchange and Shanghai Futures Exchange were mixed this morning, Wednesday February 24, with tin on the LME and the SHFE April copper contract in positive territory, while the rest were weaker.

  • US Federal Reserve Chairman Jerome Powell told Congress that rates would stay low and the central bank would maintain strong support for the economy
  • Asian-Pacific equities were weaker this morning

Base metals
LME three-month base metals prices were for the most part weaker this morning, the exception was tin that was up by 0.1% at $26,540 per tonne, while the rest were down by an average of 0.6%, with copper off by 0.4% at $9,214 per tonne – this after setting a fresh multi-year earlier this morning at $9,342 per tonne.

LME volume as of 7.26am London time was high at 16,707 lots, mainly due to the volume of copper trading – volumes have been high since China returned from the Lunar New Year holidays (February 11-17).

The most-traded base metals contracts on the SHFE were mainly weaker this morning, the exception was April copper that was up by 0.5% at 67,910 yuan ($10,503) per tonne, while the rest were down by an average of 1.6%.

Precious metals
Spot gold and silver were little changed at $1,805.58 per oz and $27.62 per oz respectively this morning, while platinum ($1,247 per oz) was down by 0.2% and palladium ($2,364.90 per oz) was up by 0.3%.

Wider markets
The yield on US 10-year treasuries eased on Wednesday and was recently quoted at 1.34%, down from 1.37% at a similar time on Tuesday.

Asian-Pacific equities were weaker across the board this morning: the Hang Seng (-3.03%), the ASX 200 (-0.9%), the CSI 300 (-2.55%), the Kospi (-2.45%) and the Nikkei (-1.61%).

The US Dollar Index remains on a back foot and was recently quoted at 90.04, this after being at 90.02 at a similar time on Tuesday.

The other major currencies were mixed: the euro (1.2164) and the Australian dollar (0.7919) were flat but buoyant, sterling (1.4179) was strong and the yen (105.56) was weaker.

Key data
Data already out on Wednesday showed Japan’s core consumer prices fell by 0.3% year on year in January, unchanged from the fall seen in December, while Germany’s final reading of fourth quarter gross domestic product (GDP) climbed by 0.3% – its earlier reading showed a 0.1% gain – after a 8.5% gain in the third quarter.

Later there is data on China’s leading indicators, with US data on home sales and crude oil inventories.

There is also a UK monetary report hearing, Federal Reserve Chairman Jerome Powell is scheduled to testify on the semiannual monetary policy report before the House Financial Services Committee, UK monetary Policy Committee member Andy Haldane and Federal Open Market Committee members Lael Brainard and Richard Clarida are scheduled to speak.

Today’s key themes and views
The metals are for the most part consolidating today after recent gains, which is no surprise after such strong runs. The underlying bullish arguments remains in force, but the metals have already done a lot on the upside so some pause for thought and consolidation would not be surprising. A pause, or correction, should also let us see how strong underlying demand really is by seeing how far prices pull back and how long they pullback for.

Gold prices saw some uplift this week, but remain in the overall downward trend. They may well continue to struggle while bond yields climb, but if a broader correction gets underway, then we would expect gold to pick-up haven demand again, especially given more talk of inflation.




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