MORNING VIEW: Metals remain in correction mode with stronger dollar a headwind

Base metals prices on the London Metal Exchange were weaker this morning, Monday March 8, but prices on the Shanghai Futures Exchange were mainly stronger while they caught up with the gains on the LME on Friday.

  • Brent crude oil prices over $70 per barrel following missile attack in Saudi Arabia
  • United States Senate passes $1.9 trillion stimulus bill

Base metals
LME three-month base metals prices were weaker this morning with prices down by an average of 0.5%, led by a 1.7% fall in tin ($23,790 per tonne). Copper was down by 0.9% at $8,892 per tonne while the rest were little changed, but lower.

The most-traded base metals contracts on the SHFE were mainly stronger this morning, the exceptions were April lead and May tin that were down by 1.2% and 1% respectively, while the rest were up by an average of 0.8%, with April copper up by 0.9% at 66,040 yuan ($10,156 per tonne).

Precious metals
Spot gold ($1,706.04 per oz) was up by 0.7%, silver ($25.58 per tonne) was up by 1.5%, platinum ($1,139.20 per oz) was up by 1.7% and palladium ($2,359.10 per oz) was up by 0.7%.

Wider markets
The yield on US 10-year treasuries has pushed higher again and was recently quoted at 1.59%.

Asian-Pacific equities were mainly weaker this morning: the Hang Seng (-1.49%), the CSI 300 (-3.21%), the Nikkei (-0.42%) and the Kospi (-1%), while the ASX 200 (+0.43%) was bucking the trend.

Currencies

The US Dollar Index continues its climb and was recently quoted at 92.11, this after a low at 89.68 on February 25, and a previous high at 91.58 on February 4.

The other major currencies were weaker: the euro (1.1896), the Australian dollar (0.7695), sterling (1.3816) and the yen (108.44).

Key data
Data already out on Monday showed Japan’s leading indicators climb to 99.1% in January, after a 95.3% reading in the prior month, and the economy watchers sentiment index climbed to 41.3 in February, up from 31.2 in January.

Later there is data on German industrial production, the European Union’s Sentix investor confidence reading and US final wholesale inventories.

In addition, Bank of England Governor Andrew Bailey is scheduled to speak.

Today’s key themes and views
The pullbacks continue and the rising dollar will be adding weight, too. This correction should let us see how strong underlying demand really is by seeing how far prices pull back and how long they pullback for.

Gold prices are trending lower because the run-up in bond yields has increased the opportunity cost of holding gold. The strong dollar will be another factor weighing on gold, but a cheaper gold price will make for a cheaper safe-haven should broader markets correct further.

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