Base metals rebound after yesterday’s weakness

The base metals are rebounding this morning, January 4,  with prices up an average of 0.5%, led by a 1% rally in lead prices, aluminium prices lag behind with a 0.1% gain, while the rest are up between 0.4 and 0.6%, with three-month copper prices up 0.5% at $5,511 per tonne. The market started on a weaker tone in Asia, at this morning’s lows prices were down an average of 0.5% with copper prices trading as low as $5,450.50 per tonnes – so it appears the early dip has attracted bargain hunting. Precious metals are stronger this morning, they are up an average of 0.7% as of 06:35 GMT, with spot gold prices up 0.5% at $1,162.61 per oz.

Yesterday, January 3, saw the base metals prices open on a stronger tone, but the rallies faded and prices ended the day closing down an average of 0.4%, with tin the only metal to hold up in positive territory. The others closed down between 0.1% for aluminium prices and 0.8% for nickel and zinc price. Precious metals were strong yesterday, closing up an average of 2.5%, led by a 4.1% rise in palladium prices, a 2.8% rise in platinum prices, a 2.5% rise in silver prices and a 0.5% rise in gold prices.

In Shanghai this morning, the base metals are down an average of 0.7%, led by a 1.8% fall in nickel prices and 1.4% fall in copper prices to Rmb 45,390 per tonne. Lead prices are down 0.9%, aluminium prices are off 0.5%, while zinc and tin prices are bucking the trend with a 0.2% gain. Spot copper prices in Changjiang are down 1.7% at Rmb 44,900-45,100 per tonne, this puts the spread at an equivalent of $42 per tonne contango, while the LME/Shanghai copper arb ratio is at 8.23.

In other metals in China, May iron ore prices are down 2.1% on the Dalian Commodity Exchange, on SHFE steel rebar prices are up 0.1%, gold prices are flat and silver prices are up 0.9%. In international markets, spot Brent crude oil prices are up 0.6% at $55.85 per barrel.

Good data out yesterday underpinned stronger equity markets with the Euro Stoxx 50 closing up 0.2%, the Dow rallied 0.6% to 19,881.76 – the 20,000 level remains elusive, but the positive tone has spread to most of Asia this morning where the Nikkei is up 2.5%, the Hang Seng is off 0.3%, the CSI 300 is up 0.6% and the ASX 200 and Kospi are up 0.1%. For now, the broader markets seem unperturbed by the uncertainty that the change in the US administration might bring. This raises the question whether the markets are too complacent – if you think back before the election result the markets were very nervous about Donald Trump winning.

In FX, the dollar index is back in high ground, but seems to be struggling to push higher with supply apparent on the run up to 104.00. The index was recently quoted at 103.22, the recent range being 103.82 and 101.53. The euro touched a fresh multi-year low yesterday at 1.0340, it was recently quoted at 1.0416, sterling is at 1.2259, the yen is weak at 117.93, while the aussie is firmer at 0.7241. The yuan remains weak at 6.9536, as does the ringgit and peso, while the other emerging market currencies we follow are if anything slightly firmer.

There is a lot of economic data out today, Japan’s manufacturing PMI climbed to 52.4 from 51.3 in November, later there is services PMI data out across Europe, data on Spanish unemployment change, UK lending, EU and Italian CPI and US total vehicle sales, plus the FOMC meeting minutes – see table below for more details.

The base metals continue to consolidate and as such remain vulnerable although dips do seem to still be attracting bargain hunting for now. Given the uncertainty that comes with the US administration change-over and the early Chinese Lunar New Year, which starts in late-January, we would not be surprised if buyers stayed on the sidelines for longer and if prices do not regain upward momentum soon, then further stale long liquidation could follow. Conversely, the washed-out precious metals may look relatively cheap if investors are looking to take profits and park gains in a safe-haven for a while.

 

Overnight Performance
GMT	06:35	+/-	+/- %	Lots
Cu	5511	29.5	0.5%	2906
Al	1688.5	1.5	0.1%	511
Ni	10025	55	0.6%	1795
Zn	2558	11.5	0.5%	2147
Pb	2027	21	1.0%	211
Sn	21085	90	0.4%	11
	Average		0.5%	7,581
Gold	1162.61	5.81	0.5%
Silver	16.396	0.116	0.7%
Platinum	932.8	7.8	0.8%
Palladium	716	9	1.3%
	Average PM		0.8%

 

SHFE Prices 06:35 GMT	RMB	Change	% Change
Cu	45390	-650	-1.4%
AL	12650	-65	-0.5%
Zn	21180	45	0.2%
Pb	17535	-160	-0.9%
Ni	84860	-1550	-1.8%
Sn	150110	360	0.2%
Average change (base metals)	0		-0.7%
Rebar	2917	3	0.1%
Iron ore	539	-11.5	-2.1%
Au	270.35	0.05	0.0%
Ag	4126	38	0.9%

 

GMT	Country	Data	Actual	Expected	Previous
12:01am	UK	BRC Shop Price Index y/y	-1.4%		-1.7%
12:30am	Japan	Final Manufacturing PMI	52.4	51.9	51.9
8:00am	Spain	Spanish Unemployment Change		-44.2K	24.8K
8:15am	Spain	Spanish Services PMI		54.8	55.1
8:45am	Italy	Italian Services PMI		52.6	53.3
8:50am	France	French Final Services PMI		52.6	52.6
8:55am	Germany	German Final Services PMI		53.8	53.8
9:00am	EU	Final Services PMI		53.1	53.1
9:30am	UK	Construction PMI		52.6	52.8
9:30am	UK	Net Lending to Individuals m/m		4.9B	4.9B
9:30am	UK	M4 Money Supply m/m		1.4%	1.1%
9:30am	UK	Mortgage Approvals		68.7K	68K
10:00am	EU	CPI Flash Estimate y/y		1.0%	0.6%
10:00am	EU	Core CPI Flash Estimate y/y		0.8%	0.8%
10:00am	Italy	Italian Prelim CPI m/m		0.3%	-0.1%
All Day	US	Total Vehicle Sales		17.7M	17.9M
7:00pm	US	FOMC Meeting Minutes

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