MORNING VIEW: Rebound in tech stocks steadied broader markets on Wednesday, but less so metals

A rebound in the United States’ Nasdaq Composite Index on Wednesday September 9 may have underpinned broader markets, but the base metals were less convinced with most ending the day in negative territory.

Base metals prices on the London Metal Exchange and Shanghai Futures Exchange were broadly lower again this morning.

  • Asian-Pacific equities and pre-market major western equity index futures, excluding the United Kingdom’s FTSE 100 index, were showing gains this morning.
  • Dip-buying still seems to be prevalent.
  • Indonesia reinstates social distancing in Jakarta after Covid-19 cases rise.
  • Dollar index turns lower again, underpinning gold in the process.

Base metals
Three-month base metals prices on the LME were for the most part weaker this morning, with the complex down by an average of 0.4; the exceptions were aluminium ($1,783.50 per tonne) that was unchanged and lead ($1,895.50 per tonne) that was up by 0.1%, while the rest were down between 0.4% for nickel ($14,845 per tonne) and 0.8% for tin ($17,910 per tonne). Copper was down by 0.6% at $6,716 per tonne.

Trading volume has, however, been light with 2,470 lots traded as of 5.48am London time, this compares with an average of 6,013 lots at a similar time across Tuesday to Friday last week.

The most-traded base metals contracts on the SHFE were down by an average of 0.4% this morning, with October aluminium and copper up by 0.1% and 0.3% respectively, with the latter at 52,040 yuan ($7,603) per tonne. The rest were down by an average of 0.7%.

Precious metals
The spot precious metals were firmer across the board this morning by an average of 0.2%. Gold was up by $0.80 per oz at $1,947.10 per oz, while silver ($27.05 per oz) was up by 0.4%, platinum ($921.50 per oz) was up by 0.2% and palladium ($2,304.30 per oz) was up by 0.2%.

Wider markets
The yield on US 10-year treasuries was recently quoted at 0.69%, this after 0.67% at a similar time on Wednesday – suggests risk-off has eased.

Asian-Pacific equities were up across the board this morning: the CSI 300 (+0.98%), the Hang Seng (+0.1%), the Nikkei (+0.72%), the Kospi (+1.07%) and the ASX 200 (+0.26%).

The dollar index has turned lower again and was recently quoted at 93.12, this after setting a recent peak at 93.66 on Wednesday. The downturn in the dollar seems to be underpinning gold prices.

With the dollar lower, the other main currencies have stopped falling and were rebounding in the cases of the euro (1.1827), the Australian dollar (0.7275) and sterling (1.3009), while the yen (106.14) was weaker.

Key data
Key data out on Thursday includes industrial production in France and Italy, UK leading indicators and gross domestic product estimates, with US data on producer prices, initial jobless claims, wholesale inventories and natural gas and crude oil inventories.

In addition, the European Central Bank (ECB) will decide on interest rates, issue a policy statement and hold a press conference – in addition, ECB president Christine Lagarde is scheduled to speak this evening.

Today’s key themes and views

Given the rebound in equities on Wednesday, it would not have been surprising to see the metals follow suit, but the loss of upward momentum in recent days may be prompting more caution – the metals do not after all attract much retail interest, while it is believed equities have picked up a big retail following into this year’s rebound.

Overall, we would not be surprised to see dips extend further across markets, including the base metals, but then given prospects for earlier infrastructure spending announcements to turn into actual orders as time passes, we would expect the upward trends in metals to resume.

Gold prices remain rangebound for now and the weaker tone in the dollar, combined with an extended period of consolidation in gold, do seem to be encouraging buying. Expect more choppy trading for now, especially ahead of today’s messages from the ECB that may end up providing more direction for the euro and the dollar.

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