Metals consolidate yesterday’s gains, but looking robust overall

 

The metals put in a strong performance yesterday, Tuesday October, 26 with average gains of 1.5 percent across three-month base metals prices and 1.1 percent across spot precious metals. Good economic data out in recent days has helped confidence and prices have managed to rise despite a headwind from a stronger dollar.

 

This morning, the base metals are consolidating, prices are off an average of 0.2 percent with pull backs ranged between 0.1 percent for nickel and 0.4 percent for lead and zinc. Aluminium prices are the only ones in positive territory, they are up 0.1 percent. Copper prices are off 0.3 percent at $4,724 per tonne.  Volume on the LME has been average with 5,061 lots traded as of 06:33 BST. Spot precious metals prices are up an average of 0.3 percent ranged between gold that is up 0.1 percent at $1,274.92 per oz and palladium that is up 0.5 percent at $635.20 per oz.

 

In Shanghai, the base metals are mixed, with average gains of 0.6 percent, but that has been skewed by a 4.2 percent rally in aluminium, while the rest of the metals are ranged between down 0.6 percent for tin and up 0.2 percent for zinc. December copper prices are down 0.2 percent at Rmb 37,720 per tonne. Spot copper in Changjiang is off 0.1 percent at Rmb 38,160-38,280 per tonne, the backwardation between spot and December has widened to an equivalent of $83 per tonne, while the LME/Shanghai copper arbitrage ratio is at 1:7.98, which should mean the arb window is open for some business.

 

In other metals in China, iron ore prices for the January contract are up 1.5 percent on the Dalian Commodity Exchange, on SHFE, January steel rebar prices are off 1.2 percent, while gold and silver prices are up 0.7 and 0.9 percent respectively. In international markets spot Brent crude oil prices are down 0.1 percent at $50.19 per barrel – there seems concern that more than a few oil producers are not so keen to cut production output.

 

Equities were weaker yesterday – the Euro Stoxx 50 and Dow closed down 0.2 and 0.3 percent respectively and Asia is generally weaker this morning with the Nikkei up 0.1 percent, the Hang Send is down 0.8 percent, the CSI 300 is off 0.2 percent, the ASX 200 is off 1.5 percent and the Kospi is down 1.2 percent.

 

In FX, the dollar index is strong at 98.76, the high yesterday was 99.12, the euro is treading water in low ground, recent quoted at 1.0888, sterling is weaker at 1.2165, the yen is weaker at 104.28, while the aussie is firmer at 0.7690. The yuan is firmer than yesterday, it was recently quoted at 6.7692, the low yesterday was 6.7809. Other emerging market currencies are for the most part firmer, led by the Brazilian real.

 

Economic data out today showed Japan’s services PPI edged up to 0.3 percent, German GfK consumer climate eased to 9.7 from 10 and Germany’s import prices edged up 0.1 percent. Later there is data out of Italian retails sales, UK mortgage approvals, with US data including goods trade balance, wholesale inventories, flash PMI services, new home sales and crude oil inventories – see table below for more details.

 

The base metals rallied strongly yesterday, which reduce their vulnerability that had started to appear. Key now will be whether there is follow through buying or not. All the metals, with the exception of tin, face nearby overhead resistance that has proved effective in recent weeks/months so we wait to see if the buying is strong enough to absorb what selling there may still be around. The metals closest to resistance are aluminium and zinc, while tin has broken higher and is trading at levels last seen in December 2014.

 

The precious metals are rebounding, led by the PGMs, but they had become oversold in recent weeks, while gold and silver prices are working higher – this despite the stronger dollar, which is a sign of strength. 

 

Overnight Performance
BST	06:33	+/-	+/- %	Lots
Cu	4724	-14	-0.3%	1460
Al	1671.5	1.5	0.1%	1618
Ni	10220	-15	-0.1%	523
Zn	2351.5	-9	-0.4%	1201
Pb	2050	-8	-0.4%	217
Sn	20250	-55	-0.3%	42
	Average		-0.2%	5,061
Gold	1274.92	0.87	0.1%
Silver	17.816	0.066	0.4%
Platinum	961.7	1.7	0.2%
Palladium	635.2	3.2	0.5%
	Average PM		0.3%

 

SHFE Prices 06:33 BST	RMB	Change	% Change
Cu	37720	-60	-0.2%
AL	13645	555	4.2%
Zn	18760	45	0.2%
Pb	16155	-15	-0.1%
Ni	81150	-20	0.0%
Sn	132900	-820	-0.6%
Average change (base metals)	0		0.6%
Rebar	2517	-30	-1.2%
Au	279.55	2.05	0.7%
Ag	4088	37	0.9%

 

Economic Agenda
BST	Country	Data	Actual	Expected	Previous
12:50am	Japan	SPPI y/y	0.3%	0.2%	0.2%
7:00am	Germany	GfK Consumer Climate	9.7	10.0	10.0
8:00am	Germany	Import Prices m/m	0.10%	0.0%	-0.2%
9:00am	Italy	Retail Sales m/m		0.2%	-0.3%
9:30am	UK	BBA Mortgage Approvals		37.3K	37.0K
1:30pm	US	Goods Trade Balance		-60.6B	-59.2B
1:30pm	US	Prelim Wholesale Inventories m/m		0.1%	-0.2%
2:45pm	US	Flash Services PMI		52.4	52.3
3:00pm	US	New Home Sales		600K	609K
3:30pm	US	Crude Oil Inventories		0.7M	-5.2M

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