Base metals prices get some lift ahead of options declaration

Base metals were split into three camps at the end of last week, after the initial sell-off at the start of the week, consolidation set in mid-week, lead and zinc prices went on to weaken further on Friday, December 2, nickel prices headed higher, while the rest continued to consolidate. Precious metals prices ended the week on a firmer note, the exception was palladium prices that pulled back 1.2% to $741 per oz. Gold prices ended the week up 0.3% at $1,176.75 per tonne.

This morning, December 5, the base metals are up 1% on average, led by a 2.5% rally in zinc prices to $2,727.5 per tonne, lead prices are up 1.5% and copper prices are up 0.9% at $5,841 per tonne. Volume has been below recent levels with 8,839 lots traded as of 06:50 GMT. Precious metals prices are off across the board with a 0.3% fall in gold, silver and platinum prices and a 0.5% fall in palladium.

In Shanghai, the base metals are quite mixed, which suggests the herd mentality may have eased and prices are trading their own fundamentals. Nickel prices are up 3.1%, copper prices are up 1.5% at Rmb 47,360 per tonne for the February contract and zinc prices are up 0.2%, while lead prices are down 2%, aluminium is down 1% and tin is off 0.4%.  Spot copper prices in Changjiang, are up 1.3% at Rmb 46,900-47,100 per tonne, the spread with the February contract is at an equivalent of $37 per tonne contango, while the LME/Shanghai copper arbitrage is at 1:8.10, which should mean the arb window is open for some trading.

In other metals in China, May steel rebar is up 1.8%, silver prices are up 0.8% and gold prices are up 0.4%. In international markets, spot Brent crude oil is down 0.3% at $54.09 per barrel.

Equities were weaker on Friday, December 2, with the Euro Stoxx 50 closing off 0.5% and the Dow closed off 0.1%. The weaker tone has flowed through Asia with the Nikkei off 0.8%, the Hang Seng is off 0.3%, the CSI 300 is down 1.7%, the ASX 200 is off 0.8% and the Kospi is off 0.4%.

In FX, the gap higher in the dollar index overnight that saw the index up at 101:55 in early trading is fading, the index was recently quoted at 101.10 – overall it is holding up in high ground, but has lost upward momentum since November 25. The euro gapped lower this morning to a low of 1.0537, it is recently quoted at 1.0606, sterling is firmer at 1.2698, the yen is weak at 113.91 and the aussie is firm at  0.7442. The yuan at 6.8739 is off the lows and the other emerging market currencies we follow are getting some lift after recent weakness.

The economic agenda is busy, China’s Caixin services PMI jumped to 53.1 from 52.4, but Japan’s consumer confidence disappointed. Later there is services PMI data out across Europe and in the US, plus there is EU Sentix investor confidence, EU retail sales and a Eurogroup meeting, with a US labor market conditions reading too.  In addition, FOMC members William Dudley and James Bullard are speaking – see table below for more details.

The base metals are looking stronger this morning, so there seems to be follow through buying following last week’s corrections. With options declaration on Wednesday, December 7, metals prices are likely to remain volatile – we wait to see if out the money calls act like magnets. Spot silver and platinum prices seem to be consolidating and base-building, while gold prices remain weak and palladium prices are pulling back as they correct some of the strength seen in November. For now, we would not be surprised if gold prices remained under pressure until after the FOMC meeting on December 14 – that is unless fall-out from Italy’s referendum result escalates.

 

Overnight Performance
GMT	06:50	+/-	+/- %	Lots
Cu	5,841	52	0.9%	3544
Al	1718	0	0.0%	951
Ni	11575	95	0.8%	873
Zn	2727.5	67.5	2.5%	2950
Pb	2300.5	34.5	1.5%	511
Sn	21175	70	0.3%	10
	Average		1.0%	8839
Gold	1173.78	-2.97	-0.3%
Silver	16.664	-0.051	-0.3%
Platinum	927.2	-2.8	-0.3%
Palladium	737.4	-3.6	-0.5%
	Average PM		-0.3%

 

SHFE Prices 06:51 GMT	RMB	Change	% Change
Cu	47360	710	1.5%
AL	13205	-135	-1.0%
Zn	22685	40	0.2%
Pb	20210	-405	-2.0%
Ni	95440	2870	3.1%
Sn	143570	-640	-0.4%
Average change (base metals)	0		0.2%
Rebar	3187	56	1.8%
Au	269.1	1.1	0.4%
Ag	4177	39	0.9%

 

Economic Agenda
GMT	Country	Data	Actual	Expected	Previous
12:01am	UK	BRC Shop Price Index y/y	-1.7%		-1.7%
1:45am	China	Caixin Services PMI	53.1	52.7	52.4
5:00am	Japan	Consumer Confidence	40.9	43.8	42.3
8:15am	Spain	Spanish Services PMI		55.1	54.6
8:45am	Italy	Italian Services PMI		51.4	51
8:50am	France	French Final Services PMI		52.6	52.6
8:55am	Germany	German Final Services PMI		55	55
9:00am	EU	Final Services PMI		54.1	54.1
9:30am	EU	Sentix Investor Confidence		14.7	13.1
9:30am	UK	Services PMI		54.2	54.5
10:00am	EU	Retail Sales m/m		0.9%	-0.2%
All Day	EU	Eurogroup Meetings
1:30pm	US	FOMC Member Dudley Speaks
2:45pm	US	Final Services PMI		54.9	54.7
3:00pm	US	ISM Non-Manufacturing PMI		55.3	54.8
3:00pm	US	Labor Market Conditions Index m/m			0.7
7:05pm	US	FOMC Member Bullard Speaks

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