MORNING VIEW: Metals prices mostly upbeat, but nickel bucks trend

A strong United States employment report at the end of last week gave most markets something to be cheerful about and that has flowed through into Asian trading on Monday December 9.

Trading is likely to remain nervous this week while the manufacturing sector prepares for the holiday season and businesses focus on whether US President Donald Trump follows through with his threat to put 15% tariffs on another $160 billion of Chinese imports from December 15.

  • Nickel and China’s CSI 300 buck the trend in an otherwise upbeat market.
  • Haven assets pullback too.

Base metals
Three-month base metals prices on the London Metal Exchange were for the most part firmer this morning, the exception was a 1.6% fall in nickel, while the rest of the complex was up by an average of 0.2%. Copper, although only little changed this morning, is back above $6,000 per tonne and was recently quoted at $6,025.50, this after putting in a strong performance on Friday. This is the highest copper has been since July.

Trading volume has been strong with 8,949 lots traded as at 7.15am London time.

In China, the most-traded base metals contracts on the Shanghai Futures Exchange were for the most part stronger. Like on the LME, February nickel was the exception with a 1% decline, while the rest were up by an average of 0.8%, led by a 2.3% gain in February copper to 48,880 yuan ($6,883) per tonne, as it caught up with LME copper’s surge on Friday.

The spot copper price in Changjiang was up by 1.6% at 48,080-48,220 yuan per tonne and the LME/Shanghai copper arbitrage ratio was at 8.03, having been 8.01 at a similar time on Friday morning.

Precious metals
Spot gold and silver prices were consolidating this morning and getting some lift, having sold off on Friday. Spot gold was recently quoted at $1,462.18 per oz, up by 0.1% from Friday’s close.

Wider markets
The spot Brent crude oil price is consolidating recent gains, it was recently off by 0.3% at $64.10 per barrel, compared with Friday’s close.

The yield on benchmark US 10-year treasuries has climbed again as risk-on returns. It was recently quoted at 1.8232% compared with around 1.8090% at a similar time last Friday. The German 10-year bund yield, however, was weaker and was recently quoted at -0.3000%, compared with -0.2910% at a similar time on Friday.

Asian equities were mainly stronger: the Nikkei (0.33%), the Kospi (0.33%), the Hang Seng (0.03%), the ASX 200 (0.34%), the exception was China’s CSI 300 (-0.18%).

This follows a strong performance in Western markets on Friday, where in the US, the Dow Jones Industrial Average closed up by 1.22% at 28,015.06; in Europe, the Euro Stoxx50 closed up by 1.21% at 3,692.34.

The dollar index is consolidating after Friday’s rebound – it was recently quoted at 97.62 compared with last week’s low of 97.35 on December 6.

The other major currencies we follow are mixed, the euro (1.1065) is consolidating after Friday’s pullback, sterling (1.3162) and the yen (108.54) are firmer and the Australian dollar (0.6826) is consolidating.

The yuan, at 7.0379, is also consolidating.

Key data
Today’s economic data schedule is light, Japan’s economic watchers sentiment climbed to 39.4 from 36.7 and later there is data on the European Union’s investor confidence from Sentix.

Today’s key themes and views
With China’s economic data showing some recovery in recent weeks and with the stronger-than-expected US employment report on Friday, it does seem as though these economies are coming to terms with the trade war, but whether they can withstand any escalation is questionable. As such, we expect choppy trading to continue until a preliminary trade deal is signed or scuppered and for prices then to react directionally.

Gold prices also seem to be in a choppy waiting pattern until the market knows more about whether the tariff war escalates on December 15.