Stronger manufacturing data lifts industrial metals prices

The base metals three-month prices closed up an average of 1.2 percent yesterday, Monday October 24, led by a 2.8 percent rally in zinc prices to $2,311 per tonne. Nickel prices were up 1.9 percent and lead prices were up 1.4 percent, aluminium and tin price were up either side of 0.4 percent, while copper was little changed at $4,643.50 per tonne. Generally good PMI data supported the bullish case for metals.

The PGMs joined the rallying base metals yesterday with spot palladium prices climbing 1.6 percent and platinum prices closing up 1.1 percent, while bullion prices were mixed with silver up 0.3 percent and gold off 0.2 percent at $1,264.25 per oz. Better US data yesterday further strengthened the dollar, while the better manufacturing data supported industrial metals directly, the stronger dollar weighed on gold prices.

This morning the base metals are up across the board and volume has picked up with 14,450 lots traded as of 06:19 BST. Zinc, lead and aluminium prices lead the way with gains of between 1.3 and 1.8 percent, copper and nickel prices are up 0.9 percent with three-month copper at $4,684 per tonne and tin is the laggard with a 0.2 percent gain to $20,080 per tonne.

Precious metals are up an average of 0.4 percent this morning, the industrial precious metals are all up 0.5 percent, while gold prices continue to struggle with a 0.1 percent gain to $1,266 per oz.

In Shanghai, the base metals have put in a strong performance with average gains of three percent, led by a 4.5 percent gain in zinc prices, four percent gains in aluminium and lead, nickel prices are up 2.2 percent and copper and tin prices are both up 1.6 percent, with December copper recently trading at Rmb 37,870 per tonne. Spot copper in Changjiang is up 1.7 percent at Rmb 38,110-38,310, the backwardation with the December futures has widened to an equivalent of $65 per tonne and the LME/Shanghai copper arbitrage window is open with the ratio at 1:8.1.

In other metals in China, January iron ore prices are up 5.9 percent on the Dalian Commodity Exchange and on the SHFE, the January steel rebar price is up 3.8 percent, silver prices are up one percent and gold prices are up 0.2 percent. In international markets, spot Brent crude prices are off 0.1 percent at $51.37 per barrel.

Equities were buoyant yesterday, the Euro Stoxx 50 closed up 0.5 percent and the Dow closed up 0.4 percent, but this morning Asia is mixed. The Nikkei is up 0.7 percent helped by a weaker yen, the ASX 200 is up 0.6 percent, but the Hang Seng and CSI 300 are off 0.2 percent and the Kospi is down 0.5 percent.

Stronger US PMI data out yesterday has raised the chances of a Fed rate rise, according to Fed Fund futures there is a 68 percent chance of a 25 basis point rate rise at the December FOMC meeting, up from 64 percent previously. This has helped lift the dollar index to a recent high of 98.85, the euro and yen are weaker on the back of that, last at 1.0883 and 104.40, while sterling and the aussie tread water at 1.2226 and 0.7634, respectively.

The yuan continues to weaken, it was recently quoted at 6.7742, the weakest since September 2010. Despite this, the other emerging market currencies we follow are flat-to-firmer suggesting a slight bias to the markets being more risk-on. The Brazilian real at 3.1211 is almost the strongest it has been all year, no doubt helped by firmer commodity prices with iron ore prices around $59.30 per tonne.

Data out today includes German Ifo business climate, US house prices index, consumer confidence, economic optimism and the Richmond manufacturing index. Bank of England Governor Mark Carney and ECB President Mario Draghi are speaking this afternoon – see table below for more details.

The base metals have all once again found support after their recent corrections and prices are on the rise again with some strong rebounds suggesting buyers are having to chase prices higher, which is a sign of underlying bullish sentiment. We remain bullish and the stronger flash PMI data out of late supports our overall outlook.

The stronger dollar is weighing on gold prices, but the other more industrial precious metals prices seem to be picking up some buying on the back of the better economic data and in the case of the PGMs because they appear to have become oversold. 

 

Overnight Performance
BST	06:19	+/-	+/- %	Lots
Cu	4684	40	0.9%	5883
Al	1658	23.5	1.4%	3524
Ni	10250	90	0.9%	931
Zn	2363	42	1.8%	3546
Pb	2057	25.5	1.3%	503
Sn	20080	45	0.2%	63
	Average		1.1%	14,450
Gold	1266.01	1.76	0.1%
Silver	17.658	0.088	0.5%
Platinum	941.6	4.6	0.5%
Palladium	634.2	3.2	0.5%
	Average PM		0.4%

 

SHFE Prices 06:22 BST	RMB	Change	% Change
Cu	37870	600	1.6%
AL	13300	510	4.0%
Zn	18955	815	4.5%
Pb	16370	625	4.0%
Ni	81580	1760	2.2%
Sn	133940	2150	1.6%
Average change (base metals)	0		3.0%
Rebar	2564	95	3.8%
Au	277.45	0.55	0.2%
Ag	4051	40	1.0%

 

Economic Agenda
BST	Country	Data	Actual	Expected	Previous
9:00am	Germany	Ifo Business Climate		109.5	109.5
2:00pm	US	HPI m/m		0.5%	0.5%
2:00pm	US	S&P/CS Composite-20 HPI y/y		5.0%	5.0%
3:00pm	US	CB Consumer Confidence		101.5	104.1
3:00pm	US	IBD/TIPP Economic Optimism		47.6	46.7
3:00pm	US	Richmond Manufacturing Index		-4	-8
3:35pm	UK	BOE Gov Mark Carney Speaks
4:30pm	EU	ECB President Mario Draghi Speaks

 

 

 

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