MORNING VIEW: Metals prices tread water, waiting for developments on trade talks

The markets remain in limbo this morning, Friday September 20, while they wait for any news from the initial talks that are underway between deputy trade negotiators in the United States.

With the US, Europe and China all showing they are prepared to ease monetary policy and with some signs of slightly better economic data, the markets seem a little less nervous and with that prices are managing to drift higher. But the slightly better sentiment could be dashed if initial trade talks run into problems.

  • Equities in Asia are mainly firmer this morning
  • Gold prices edge higher, suggesting some participants moving into havens ahead of the weekend

Base metals

Three-month base metals prices on the London Metal Exchange were either firmer or little changed this morning, with aluminium and tin little changed and the rest up by an average of 0.3% - led by a 0.7% gain in nickel to $17,425 per tonne. Copper was up by 0.3% at $5,813.50 per tonne.

In China, the most-traded base metals contracts on the Shanghai Futures Exchange were mixed this morning, with November aluminium, nickel and lead showing gains averaging 0.4%, while November zinc was off by 0.2%, January tin was off by 0.5% and November copper was little changed at 47,120 yuan ($6,638) per tonne.

The spot copper price in Changjiang was down by 0.1% at 47,300-47,410 yuan per tonne and the LME/Shanghai copper arbitrage ratio was little changed at 8.1.

Precious metals
Spot gold prices have been consolidating either side of $1,500 per oz and were recently quoted at $1,505.32 per oz, which is near the top of their recent consolidation range that runs between around $1,484 and $1,512 per oz. Silver and platinum are consolidating, while palladium has climbed to a fresh record high of $1,648 per oz.

Wider markets
Spot Brent crude oil prices were little changed and recently were quoted at $64.82 per barrel as they consolidate from Monday’s spike up to $69.63 per barrel.

The yield on benchmark US 10-year treasuries has pulled back further after the recent relief rally - it was recently quoted at 1.7596%, compared with 1.8616% on Monday. The German 10-year bund yield has also weakened again and was recently quoted at -0.5200%, compared with -0.4800% at a similar time on Wednesday.

Asian equities were firmer on Friday: The Nikkei (+0.16%), the Hang Seng (flat), the CSI 300 (+0.11%), the Kospi (+0.50%) and the ASX 200 (+0.20%).

This follows a mixed performance in Western markets on Thursday, where in the US, the Dow Jones Industrial Average closed down by 0.19% at 27,094.79, and in Europe, the Euro Stoxx50 closed up by 0.70% at 3,552.65.

The dollar index is oscillating sideways below the early September multi-year peak at 99.38 and was recently quoted at 98.20.

While the dollar consolidates the other major currencies are mixed: the euro (1.1056), the Australian dollar (0.6805) and the yen (107.86). Although, sterling (1.2575) is showing some strength because there is slightly more optimism that a Brexit deal may still be possible.

Key data
Friday’s economic agenda contains data on Germany’s producer price index that fell 0.5%, it had been expected to be flat. Later there is data on consumer confidence in the European Union.

In addition, there is a quarterly bulletin from the Bank of England and US Federal Open market Committee members John Williams and Eric Rosengren are speaking.

Today’s key themes and views
For the most part, the LME base metals appear to be in wait-and-see mode, waiting for developments on trade talks and that is likely to set the next direction. Bases seem to be in place, from which rallies could get underway, but if trade talks turn sour again then there may well be room for another sell-off.

Gold prices have been consolidating, they have avoided selling off too much despite a slightly less concerned climate. That said, prices are firmer today, which may indicate some haven buying ahead of the weekend in case any negative developments emerge - this would suggest what confidence there is out there is fragile and that is not surprising.

base metals

precious metals

macroeconomic data

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