Metals not overreacting to Trump’s lead

• Donald Trump’s lead shocks the markets, gold price up, base metals off, but not by much

The metals started in consolidation mode yesterday but that generally reversed as the day progressed with three-month copper prices rallying 2.9 percent to $5,247.50 per tonne, lead prices were up 1.2 percent, zinc prices closed up 0.4 percent, aluminium and nickel were little changed and tin prices bucked the trend with a 2.4 percent drop to $21,315 per tonne. Precious metals are mixed, spot gold prices dropped back to $1,273.30 per oz as it looked like Hillary Clinton was on her way to the White House, while the more industrial precious metals were firmer, closing up an average of 0.8 percent.

This morning the markets are suffering another political shock, the base metals prices are down an average of 0.7 percent, but that is a relatively mild response when you consider gold prices are up four percent and the pre-market Dax is showing a four percent drop. Volumes on the LME have been massive with 27,250 lots traded as of 05:58 GMT. Three-month copper, aluminium and zinc are down around one percent, lead is off 1.9 percent, nickel is little changed and tin prices are up 0.6 percent. Copper is still considerably higher at $5,189 per tonne than where it has been in recent weeks and months .

Spot gold prices are leading most of the precious metals higher with gold prices up four percent at $1,324.23 per oz, they have been a high as $1,337.50 per oz. Palladium prices are off 0.3 percent, but it did over perform yesterday.

In Shanghai, the January base metals are up an average of 1.1 percent, the metals are still playing catch-up from yesterday’s performances on the LME. Copper leads the way with a 3.3 percent gain to Rmb 41,880 per tonne. Aluminium is up 1.5 percent, nickel is up 1.3 percent and zinc is up 0.4 percent, the rest are little changed. Spot copper in Changjiang is up three percent at Rmb 41,720-41,920, the spread with the futures is at an equivalent of $18 per tonne back and the LME/Shanghai copper arb ratio has widened to 1:8.04, which should mean the arb window is open again.

In other metals in China, January iron ore prices have raced higher by 5.9 percent and steel rebar prices are little changed. In international markets, spot Brent crude is down 1.7 percent at $45 per barrel.

Equities were complacent about a Hillary Clinton win yesterday it would seem, the Euro Stoxx 50 closed up 0.5 percent and the Dow closed up 0.4 percent. This morning Asia tells a different story with the Nikkei off 5.4 percent, the Hang Seng is down 3.3 percent, the Kospi is down 2.3 percent, the ASX 200 is off 1.9 percent, but the CSI 300 is down just 0.2 percent.

In FX, the dollar index has plunged to a low of 95.88 (the recent peak on October 25 was 99.12), it was more recently quoted this morning at 96.57. Conversely other major currencies have rallied with the euro at 1.1205, the yen at 102.30 and sterling at 1.2469, while the aussie is weaker at 0.7636. The yuan is slightly firmer at 6.7700, while most of the other emerging market currencies are weaker. The Mexican pes,o which we do not normally follow, has fallen from 18.3040 to 20.1440, a ten percent drop.

Economic data out showed some improved Chinese data with the CPI climbing 2.1 percent, but PPI leap up to 1.2 percent from 0.1 percent, it was expected to come in at 0.8 percent. Japan’s economic watchers sentiment climbed to 46.2 from 44.8. Later there is data on US wholesale and crude oil inventories. The EU is publishing economic forecasts and UK’s Monetary Policy Committee member Andrew Haldane is speaking – see table below for more details.

The base metals’ reaction to how the US election results are unfolding seems relatively mild – given the strength of the base metals of late some consolidation at lower numbers would be expected anyway. Volumes on the LME have been exceptionally strong so it does suggest there has been good two-way interest, which means buyers are still active. We would expect volatile trading today as traders and investors adjust to what is unfolding.

The run up in gold prices was to be expected, but prices are already slipping – again we would expect volatile trading to dominate as developments unfold. We wait to see how well supported dips are.

 

Overnight Performance
GMT	05:58	+/-	+/- %	Lots
Cu	5189	-59	-1.1%	10008
Al	1713	-18	-1.0%	6172
Ni	11230	10	0.1%	5607
Zn	2456	-25	-1.0%	4848
Pb	2090.5	-39.5	-1.9%	551
Sn	21450	135	0.6%	64
	Average		-0.7%	27,250
Gold	1324.23	50.93	4.0%
Silver	18.814	0.489	2.7%
Platinum	1015.5	16.5	1.7%
Palladium	659.8	-2.2	-0.3%
	Average PM		2.0%

 

SHFE Prices 05:58 GMT	RMB	Change	% Change
Cu	41800	1350	3.3%
AL	13550	195	1.5%
Zn	19935	70	0.4%
Pb	16720	30	0.2%
Ni	91080	1190	1.3%
Sn	150220	-20	0.0%
Average change (base metals)	0		1.1%
Rebar	2998	1	0.0%

 

Economic Agenda
GMT	Country	Data	Actual	Expected	Previous
1:30am	China	CPI y/y	2.1%	2.1%	1.9%
1:30am	China	PPI y/y	1.2%	0.8%	0.1%
5:00am	Japan	Economy Watchers Sentiment	46.2	44.4	44.8
9:30am	UK	Goods Trade Balance		-11.3B	-12.1B
10:00am	EU	EU Economic Forecasts
3:00pm	US	Final Wholesale Inventories m/m		0.2%	0.2%
3:30pm	US	Crude Oil Inventories		1.3M	14.4M
6:00pm	UK	MPC Member Haldane Speaks

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