Metals prices remain upbeat

• Chinese manufacturing PMI 51.2

The base metals closed up with average gains of 0.8 percent yesterday, led by a 2.6 percent rally in three-month zinc prices to $2,462 per tonne, aluminium prices closed up 1.2 percent and copper prices were up 0.3 percent at $4,862 per tonne, while lead prices bucked the trend with a 0.2 percent drop. Precious metals were mixed yesterday, spot gold prices closed off 0.6 percent at $1,276.05 per oz, silver was up 0.6 percent at $17.86 per oz, platinum was off 0.2 percent and palladium was unchanged.

This morning the base metals are firmer across the board by an average gain of 0.3 percent, led by a 0.9 percent rise in three-month tin prices to $20,775, aluminium prices are little changed, while the rest are up between 0.2 percent for copper ($4,872 per tonne) and 0.4 percent for tin. Considerably stronger than expected Chinese PMI data has helped to lift sentiment.  Volume has been higher than average with 9,536 lots traded as of 06:52 GMT. Precious metals are up an average of 0.6 percent this morning, led by gains in the spot PGM’s that are up around 0.8 percent, while silver prices are up 0.5 percent and gold prices are up 0.3 percent at $1,279.7 per oz.

In Shanghai, the base metals are up an average of 1.7 percent, led by a 3.7 percent rally in December zinc prices, tin prices are up 2.2 percent and copper prices are up 1.1 percent at Rmb 38,830 per tonne. Spot copper in Changjiang is up 0.4 percent at Rmb 38,660-38,860 per tonne, the backwardation with the December contract has slipped to an equivalent of $4 per tonne, while the LME/Shanghai copper arb ratio is last at 1:7.97, which means the arbitrage window is just closed.

In other metals in China, January iron ore prices on the Dalian Commodity Exchange are up 1.5 percent, January steel rebar prices on SHFE are up 2.2 percent, December gold prices are up 0.4 percent and silver prices are up 0.9 percent.  In international markets, spot Brent crude oil prices are up 0.4 percent at $49.06 per barrel.

Equities were weaker yesterday with the Euro Stoxx 50 closing down 0.8 percent, the Dow closed off 0.1 percent, while Asia is for the most part firmer with the Nikkei up 0.1 percent, the Hang Seng is up 1.3 percent, the CSI 300 is up 0.7 percent, the Kospi is little changed, but the ASX 200 is off 0.5 percent.

In FX, the dollar index is at 98.38, so is consolidating after the recent strong run higher, but a non-rising dollar may well provide some lift to commodities. The euro is firmer at 1.0976, sterling is flat at 1.2230, the yen is weak at 104.91 and the aussie is firmer at 0.7666. In emerging market (EM) currencies, the yuan is consolidating after recent  weakness, it is recently quoted at 6.7754, the rand is stronger at 13.5134, the rouble is weaker at 63.13, while the others are little changed.

The economic calendar is busy today, Japan’s manufacturing PMI dropped to 51,4 from 51.7, but Chinese manufacturing PMIs, both the official and the Caixin readings, beat expectations coming in at 51.2 having been expected at 50.3. China’s non-manufacturing PMI also came in stronger than expected at 54. Later there is PMI data out in the UK and US, plus US data on construction spending, economic optimism and total vehicle sales – see table below for more details.

The stronger tone in the base metals continues with aluminium, zinc and tin prices setting fresh highs for the year, copper prices have broken above their down trend line that started off the March high, while lead prices seem less sure about being bullish with prices paused below its September highs. All in all, the metals look well placed to push higher helped by the stronger PMI data out of China.

Gold prices are edging higher and it seems more likely that a base has now been established, the halt in the dollar’s rise may well be providing some lift too. Silver prices are following gold’s lead, platinum prices are consolidating after last week’s gains and palladium prices appear to have found some support, but it is still early days. Given the pullback in gold prices in October, after earlier strong gains, we would not be surprised if more physical buying started to emerge now it looks like a base may be in place.   

 

Overnight Performance
GMT	06:52	+/-	+/- %	Lots
Cu	4872	10	0.2%	2775
Al	1736	-0.5	0.0%	1777
Ni	10520	95	0.9%	1316
Zn	2469.5	7.5	0.3%	2916
Pb	2069	6	0.3%	681
Sn	20775	75	0.4%	71
	Average		0.3%	9,536
Gold	1279.71	3.66	0.3%
Silver	17.957	0.097	0.5%
Platinum	984	8	0.8%
Palladium	623.5	5.5	0.9%
	Average PM		0.6%

 

SHFE Prices 06:55 GMT	RMB	Change	% Change
Cu	38830	410	1.1%
AL	14130	70	0.5%
Zn	19935	720	3.7%
Pb	16755	285	1.7%
Ni	83810	1000	1.2%
Sn	137770	2930	2.2%
Average change (base metals)	0		1.7%
Rebar	2638	56	2.2%
Au	280.6	1.25	0.4%
Ag	4108	35	0.9%

 

Economic Agenda
BST	Country	Data	Actual	Expected	Previous
12:30am	Japan	Final Manufacturing PMI	51.4	51.7	51.7
1:00am	China	Manufacturing PMI	51.2	50.3	50.4
1:00am	China	Non-Manufacturing PMI	54		53.7
1:45am	China	Caixin Manufacturing PMI	51.2	50.3	50.1
2:55am	Japan	BOJ Outlook Report
2:55am	Japan	BOJ Policy Rate	-0.1%	-0.1%	-0.1%
2:55am	Japan	Monetary Policy Statement
6:30am	Japan	BOJ Press Conference
9:30am	UK	Manufacturing PMI		54.5	55.4
1:45pm	US	Final Manufacturing PMI		53.2	53.2
2:00pm	US	ISM Manufacturing PMI		51.8	51.5
2:00pm	US	Construction Spending m/m		0.5%	-0.7%
2:00pm	US	IBD/TIPP Economic Optimism		48.7	51.3
2:00pm	US	ISM Manufacturing Prices		54	53
All Day	US	Total Vehicle Sales		17.5M	17.8M

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