Metals consolidate in high ground ahead of data and US election

Base metals prices put in a strong performance yesterday with average gains of 1.4 percent, led by a 2.3 percent gain in zinc to $2,483 per tonne, basis three-month prices. Aluminium prices were up 0.8 percent, the rest were up between 1.1 percent for copper prices ($4,957.50 per tonne) and 1.8 percent for tin prices ($21,150 per tonne). Precious metals were mixed yesterday, spot gold prices were up 0.3 percent at $1,302.15 per oz, silver prices were down one percent, platinum was up 0.4 percent and palladium prices dropped 1.9 percent to $615 per oz.

This morning, three-month tin prices are up 1.1 percent at $21,380 per tonne, the rest of the base metals are off an average 0.3 percent, with copper prices off 0.2 percent at $4,949 per tonne. Volume is above average with 6,403 lots traded. Precious metals are mixed, spot palladium prices up 0.5 percent, the rest are down between 0.4 percent for gold prices ($1,297.50 per oz) and 0.7 percent for silver prices.

In Shanghai, the January base metals are up an average of 0.5 percent, led by tin that was up 3.2 percent, copper prices are up 0.6 percent at Rmb 39,230 per tonne, lead is up 0.5 percent, while aluminium is off 1.1 percent. Spot copper in Changjiang is up one percent at Rmb 39,200-39,400 per tonne, the backwardation with the January contract is at an equivalent of $25 per tonne, while the LME/Shanghai copper are ratio has widened again to 1:7.98, which means the arb window is borderline open.

In other metals in China, January iron ore prices are up 0.8 percent on the Dalian Commodity Exchange and on SHFE, steel rebar prices are off 0.3 percent, gold prices are up 0.2 percent and silver prices are little changed. In international markets, spot Brent crude oil prices are up 0.4 percent at $46.44 per barrel.

Equities – the Euro Stoxx 50 and Dow both closed down 0.2 percent yesterday and this morning Asia is mixed with the Nikkei off 1.3 percent, the Hang Seng is up 0.1 percent, the CSI 300 is off 0.4 percent, the ASX 200 is down 0.9 percent and the Kospi is off 0.1 percent. Markets do seem to be focused on next week’s US election, with today’s US employment report possibly another market moving event.

In FX, the dollar continues to retreat with the index at 97.29, the euro has benefitted, is was recently quoted at 1.1093, sterling is stronger at 1.2450, the yen is treading water at 103.34, as is the aussie at 0.7663. The yuan at 6.7617 is consolidating after recent weakness, the real is weakening in line with the dollar, while most other emerging market currencies are consolidating but nearer to the lower end of their recent ranges – all of which suggests some nervousness ahead of today’s US employment report and the US election.

The economic calendar is busy with services PMI data out across Europe, plus EU PPI, while US data includes the monthly employment report and the trade balance. UK’s Monetary Policy Committee member Kristin Forbes and FOMC member Stanley Fischer are speaking this afternoon – see table below for more details.

The base metals prices have been working higher in recent days and given this week has been London Metals Week when the global industry gathers, the price performance suggests sentiment is far from bearish and possibly even getting a bit more bullish. Tin price are ramping higher, given the shortages in LME stocks that is not surprising and without the backwardation flaring out, the market seems relatively orderly. Today’s US employment report, if good, could well throw the dollar a lifeline and that could add a headwind to the metals, but with the weekend and the US election ahead we would not be surprised to see some book squaring as traders take risk off the table, especially if the recent stronger prices have generated some unrealised profits.

Gold prices are trading either side of the $1,300 per oz level, which was where prices started to break down in early October, so this is an important level for prices to get back and hold above if the overall upward trend is to remain in place. Silver and palladium prices are testing lower for support, while platinum prices are holding up relatively well, as indeed are gold prices. We would expect gold to remain supported until there is more certainty about the US election result.

 

Overnight Performance
GMT	06:18	+/-	+/- %	Lots
Cu	4949	-8.5	-0.2%	1938
Al	1723	-3.5	-0.2%	1536
Ni	10450	-30	-0.3%	503
Zn	2472.5	-10.5	-0.4%	2213
Pb	2089.5	-5	-0.2%	156
Sn	21380	230	1.1%	57
	Average		0.0%	6,403
Gold	1297.47	-4.68	-0.4%
Silver	18.23	-0.125	-0.7%
Platinum	989.5	-5.5	-0.6%
Palladium	618.3	3.3	0.5%
	Average PM		-0.3%

 

SHFE Prices 06:18 GMT	RMB	Change	% Change
Cu	39230	240	0.6%
AL	13260	-150	-1.1%
Zn	19640	0	0.0%
Pb	16710	85	0.5%
Ni	83230	-50	-0.1%
Sn	142410	4440	3.2%
Average change (base metals)	0		0.5%
Rebar	2741	-8	-0.3%
Au	284.55	0.55	0.2%
Ag	4152	2	0.0%

 

Economic Agenda
GMT	Country	Data	Actual	Expected	Previous
9:15am	Spain	Services PMI		55.2	54.7
9:45am	Italy	Services PMI		51.6	50.7
9:50am	France	Final Services PMI		52.1	52.1
9:55am	Germany	Final Services PMI		54.1	54.1
10:00am	EU	Final Services PMI		53.5	53.5
11:00am	EU	PPI m/m		0.0%	-0.2%
1:30pm	US	Average Hourly Earnings m/m		0.3%	0.2%
1:30pm	US	Non-Farm Employment Change		174K	156K
1:30pm	US	Unemployment Rate		4.9%	5.0%
1:30pm	US	Trade Balance		-37.5B	-40.7B
3:45pm	UK	MPC Member Forbes Speaks
9:00pm	US	FOMC Member Fischer Speaks

 

 

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