Base metals consolidate, good Chinese trade data bodes well

The base metals headed higher ahead of option declaration on December 7, and at the day’s highs prices were up an average of 1.3% – they ended the day down an average of 1.1%, with tin and aluminium the only metals to close in positive territory. Three-month copper prices closed down 0.7% at $5,830 per tonne. With option declaration now out of the way, we wait to see how well supported the dips are.

Precious metals found some support on December 7, this time yesterday prices were down an average of 0.2%, they ended yesterday with gains of 1%, led by a 2.5% rise in silver prices, gold prices closed up 0.5% at $1,174.55 per oz.

This morning December 8, the base metals are little changed, tin prices are up 0.4%, copper prices down 0.3% at $5,811 per tonne, aluminium prices are up 0.3% at $1,717.50 per tonne and the rest are either side of unchanged. Volume has returned to levels seen before activity picked up in late October – 6,825 lots have traded as of 06:55 GMT. Precious metals are little changed with spot gold prices up 0.1%, silver prices are down 0.1%, platinum prices are up 0.2% and palladium prices are off 0.2%.

In Shanghai, the base metals are down an average of 0.5%, zinc and copper prices lead the decline with losses of 1.5% and 1.3%, with copper prices at Rmb 47,330 per tonne, nickel prices are down 1%, while aluminium, lead and tin are up 0.2%. Spot copper prices in Changjiang are down 1.2% at Rmb 46,900-47,100 per tonne. The spread between spot copper and the February contract is at an equivalent of $33 per tonne contango, while the LME/Shanghai copper arb ratio is at 1:8.15, which suggests the arb window should be open for some trading.

In other metals in China, May iron ore prices are up 1.1% on the Dalian Commodity Exchange, on SHFE steel rebar prices are up 1.6%, gold prices are up 0.8% and silver prices are up 2.1%. In international markets, spot Brent crude prices are unchanged at $53 per barrel.

Equities remain upbeat with the Euro Stoxx 50 and Dow closing up 1.3% and 1.6% respectively yesterday, and for the most part the firmer tone has spread through to Asia this morning. The Nikkei is up 1.5%, the Hang Seng is up 0.4%, the ASX 200 is up 1.2%, the Kospi is 2% but the CSI 300 is off 0.2%.

In FX, the dollar index continues to look heavy on the chart -it was recently quoted at 100.12. Conversely, the euro and other currencies look brighter with the euro at 1.0765, the yen at 113.64 and the aussie at 0.7484 – sterling is off recent highs, it seems to be consolidating around 1.2650. The yuan is also flat at 6.8944 and the other emerging markets we follow are all recovering quite sharply, which suggests a degree of risk-on in emerging markets.

China’s exports and imports both climbed in November suggesting both a pick-up in domestic and global demand.  Japan’s economic watchers sentiment climbed to 48.6 from 46.2 and French non-farm payrolls were up 0.3%. Later we get the ECB interest rate decision and press conference, followed by US initial jobless claims and natural gas storage data.

The base metals started to pull back yesterday afternoon and on the charts the metals look ripe for at least some consolidation and given the extent of the gains that could well turn into a correction. We should get a better understanding of how bullish underlying sentiment still is by seeing how the markets handle any pullback. That said, with better than expected Chinese trade data, dip buying may well come in sooner rather than later.

Silver and platinum prices are working higher and seem to have put bases in, while gold prices languish around in low ground and palladium prices are correcting some of their recent gains. At some stage we would not be surprised to see some rotation back into gold, but that may not happen until after the FOMC meeting is out of the way.

 

Overnight Performance
GMT	06:55	+/-	+/- %	Lots
Cu	5811	-19.5	-0.3%	3384
Al	1717.5	5.5	0.3%	1203
Ni	11400	-10	-0.1%	674
Zn	2745	-3	-0.1%	1238
Pb	2321.5	1.5	0.1%	318
Sn	21100	75	0.4%	8
	Average		0.0%	6,825
Gold	1176.03	1.48	0.1%
Silver	17.115	-0.01	-0.1%
Platinum	943	2	0.2%
Palladium	729.4	-1.6	-0.2%
	Average PM		0.0%

 

SHFE Prices 06:56 GMT	RMB	Change	% Change
Cu	47330	-600	-1.3%
AL	13085	30	0.2%
Zn	22845	-340	-1.5%
Pb	20955	35	0.2%
Ni	95280	-930	-1.0%
Sn	145080	230	0.2%
Average change (base metals)	0		-0.5%
Rebar	3390	53	1.6%
Au	270.2	2.2	0.8%
Ag	4262	86	2.1%

 

Economic Agenda
GMT	Country	Data	Actual	Expected	Previous
12:01am	UK	RICS House Price Balance	30.0%	26.0%	23.0%
3:41am	China	Trade Balance	298B	307B	325B
3:54am	China	USD-Denominated Trade Balance	44.6B	46.9B	49.1B
5:00am	Japan	Economy Watchers Sentiment	48.6	45.6	46.2
6:30am	France	French Final Non-Farm Payrolls q/q	0.3%	0.3%	0.3%
All Day	Italy	Italian Bank Holiday
12:45pm	EU	Minimum Bid Rate		0.0%	0.0%
1:30pm	EU	ECB Press Conference
1:30pm	US	Initial jobless claims		255K	268K
3:30pm	US	Natural Gas Storage		-44B	-50B

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