Look for more direction in metals post option declaration

The base metals continued to diverge yesterday, December 6, with three-month zinc prices pushing higher with a 1.7% gain, lead prices were up 1.1%, while tin dropped 1.3%, aluminium was off 1.1%, copper was down 0.9% at $5,872.50 per tonne and nickel was off 0.1%. Precious metals were down an average of 0.4% yesterday, led by a 1.3% retreat in spot palladium prices to $732 per oz, while the rest were little changed with spot gold prices closing at $1,168.90 per oz.

This morning, December 7, three-month copper prices are up 0.8% at $5,920 per tonne, nickel prices are up 0.4% and the rest of the metals are off between 0.1% and 0.2%. Volume has been lower than of late with 7,828 lots traded as of 05:58 GMT. Precious metals remain on a back footing, spot prices are down 0.2% across the board, with gold prices at $1,166.80 per oz.

In Shanghai, aluminium leads on the downside with prices down 2%, conversely, lead is up 2.6%, February copper prices are off 0.6% at Rmb 47,670 per tonne, nickel and zinc prices are up 0.2% and tin prices are down 0.2%. Spot copper in Changjiang is off 0.5% at Rmb 47,490-47,690, which means the spread is either side of level, while the LME/Shanghai copper arb ratio is at 1:8.03.

In other metals in China, May iron ore prices are up 5.7% on the Dalian Commodity Exchange and on SHFE May steel rebar is up 4.9%, gold prices are down 0.2% and silver prices are up 0.2%. In international markets, spot Brent crude oil prices are down 0.1% at $53.80 per barrel.

Equities remained upbeat yesterday with the Euro Stoxx 50 rising 1.6% and the Dow closed up 0.2%. Asia has followed through this morning and is firmer with the Nikkei up 0.7%, the Hang Seng is up 0.3%, the CSI 300 and Kospi are up 0.2% and the ASX 200 is up 0.9%.

In FX, the dollar index is consolidating after Monday’s drop with the index recently quoted at 100.50, having been as low at 99.85 on December 5. The euro is consolidating at 1.0720, as is sterling at 1.2660, while the yen and aussie are looking weaker at 114.26 and 0.7436. The yuan remains weak at 6.8996, the other emerging market currencies we follow have been rebounding in recent days, although today they are consolidating those gains.

On the economic data front, Japan’s leading indicators edged higher to 101%, later there is data out of Europe on German industrial production, France’s trade balance, UK house prices, Italian unemployment, UK GDP estimates and manufacturing and industrial output, with US data including job openings, crude oil inventories and consumer credit – see table below for more details.

The base metals are expected to remain choppy ahead of this morning’s option declaration and prices may well then become more directional again once that has passed. On balance, the trends are bullish so the path of least resistance is to the upside, but prices do seem to have run ahead of the fundamentals in recent weeks so we would not be surprised to see some consolidation set in for a while.

Gold prices remain under pressure, they set a fresh low yesterday at $1,157.40 per oz, silver and platinum prices are holding up better, while palladium prices are correcting. We feel it may be that investors need to get the FOMC decision out of the way, before they can review their stance on gold. Given a lot of political uncertainty in 2017, we would have expected more safe-haven buying, but the market seems in no rush. 

 

Overnight Performance
GMT	05:58	+/-	+/- %	Lots
Cu	5920	47.5	0.8%	3154
Al	1705.5	-1.5	-0.1%	1351
Ni	11660	45	0.4%	1374
Zn	2810	-6.5	-0.2%	1707
Pb	2361	-5.5	-0.2%	217
Sn	20900	-100	-0.5%	25
	Average		0.0%	7,828
Gold	1166.8	-2.1	-0.2%
Silver	16.664	-0.041	-0.2%
Platinum	930.5	-1.5	-0.2%
Palladium	730	-2	-0.3%
	Average PM		-0.2%

 

SHFE Prices 06:00 GMT	RMB	Change	% Change
Cu	47670	-280	-0.6%
AL	12955	-270	-2.0%
Zn	23105	55	0.2%
Pb	20960	525	2.6%
Ni	95840	160	0.2%
Sn	144340	-280	-0.2%
Average change (base metals)	0		0.0%
Rebar	3377	159	4.9%
Au	267.8	-0.45	-0.2%
Ag	4176	-2	0.0%

 

Economic Agenda
GMT	Country	Data	Actual	Expected	Previous
5:00am	Japan	Leading Indicators	101.0%	101.6%	100.3%
7:00am	Germany	German Industrial Production m/m		0.9%	-1.8%
7:45am	France	French Trade Balance		-4.2B	-4.8B
8:30am	UK	Halifax HPI m/m		0.2%	1.4%
9:00am	Italy	Italian Quarterly Unemployment Rate		11.6%	11.5%
9:30am	UK	Manufacturing Production m/m		0.2%	0.6%
9:30am	UK	Industrial Production m/m		0.2%	-0.4%
Tentative	UK	30-y Bond Auction			1.49|2.2
3:00pm	UK	NIESR GDP Estimate			0.4%
3:00pm	US	JOLTS Job Openings		5.53M	5.49M
3:30pm	US	Crude Oil Inventories		-1.4M	-0.9M
8:00pm	US	Consumer Credit m/m		17.5B	19.3B

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