Metals consolidate, despite dovish Fed talk and better Chinese data

The weaker tone in the base metals ran into some buying yesterday as seen by the underlying tails on most of the candlesticks on yesterday’s charts. The complex closed down with average losses of 0.9 percent, led by a 2.6 percent drop in nickel to $10,090, zinc and tin closed off 1.2 percent, while copper managed to buck the trend with a 0.6 percent climb to $4,659. Precious metals were mixed yesterday with gold prices closing unchanged at $1,327.85, silver rebounded 0.4 percent to $19.11, while the PGMs continued to weaken, platinum closed off 0.8 percent and palladium dropped 2.1 percent to $659.

This morning some better Chinese economic data and dovish Fed remarks have enabled the base metals to consolidate, copper is off 0.3 percent at $4,646, aluminium is up 0.2 percent at $1,573, zinc is up 0.1 percent and the rest are unchanged – volume is below average at 4,079 lots, compared with 10,055 lots at the same time of day yesterday.

Precious metals are up an average of 0.5 percent, led by a 1.1 percent rebound in palladium, gold is little changed at $1,329.10 and silver and platinum are up around 0.4 percent.

In Shanghai, the base metals are mixed, nickel and tin remain under pressure and are down around 1.3 percent, zinc is off 0.4 percent, lead is little changed, while copper and aluminium are up around 0.5 percent with copper at Rmb 36,540. Spot copper in Changjiang is up 0.3 percent at Rmb 36,650-36,750, the spread between spot and November is at an equivalent of $31 per tonne backwardation, while the LME / Shanghai copper arb ratio is at 7.86, which means the arb window is probably closed for most trades.

In other metals in China, iron ore futures on the Dalian Exchange is down 3.2 percent, steel rebar is down 1.8 percent, gold prices are unchanged and silver is up 0.4 percent. In international markets, Brent crude oil is at $48.

Equities recovered after Friday’s and early Monday’s weakness – the Euro Stoxx 50 closed down 1.3 percent having been down 2.3 percent in early Monday trading, while the Dow closed up 1.3 percent. Asia this morning is mixed, the Nikkei is up 0.4 percent, the Hang Seng is up 0.9 percent and the Kospi is up 0.5 percent, but the rest are weaker with the CSI 300 off 0.3 percent and the ASX200 is off 0.2 percent.

In FX, the dollar index is in mid-ground at 95.20, as are the euro at 1.1230 and yen at 101.88, sterling is firm at 1.3321 and the aussie is weaker at 0.7530. In emerging market currencies the yuan is weaker at 6.6798 and most of the other currencies we follow are on a back foot – suggesting the risk-off mode may still be lingering.

The economic agenda is busy today, the data out already is encouraging with Japan’s BSI manufacturing index at 2.9, it was expected to be -6.5, China’s industrial production climbed 6.3 percent, after 6 percent previously, fixed asset investment was 8.1 percent, unchanged but better than expected and retail sales at 10.6 percent beat expectations for a 10.2 percent rise, which would have been unchanged. Later there are a host of German and UK price data, including CPI, Italian industrial production, German and EU ZEW economic sentiment, EU employment change, US small business index and the Federal budget deficit. In addition, ECB President Mario Draghi is speaking at 10am BST – see table below for more details.

The path of least resistance for the base metals seems to be to the downside at present but there does seem to be some bargain hunting along the way. Whether the better than expected Chinese data is enough to instil more confidence remains to be seen. On balance, we would look for the metals to consolidate, but they may test support in the process. We are not overly bearish and the better Chinese data may well stop the recent correction from extending too much further, especially in the likes of copper where prices have pulled back to this year’s up trend line. Aluminium is close to its up trend line, while zinc, lead and nickel could fall further as their retreats have been fairly limited so far.

Gold prices continue to oscillate sideways with prices generally holding up well and trading either side the 20 day moving average, even if the average is drifting slightly lower. The other precious metals have pulled back too, but seem to have found some underlying support, although their more volatile trading makes them look more vulnerable – expect dips to be well supported, especially the PGMs given the potential for strikes in South Africa.

 

Overnight Performance
BST	06:38	+/-	+/- %	Lots
Cu	4646	-13	-0.3%	1334
Al	1573	3.5	0.2%	1469
Ni	10090	0	0.0%	383
Zn	2266	2.5	0.1%	747
Pb	1883	0	0.0%	139
Sn	19005	5	0.0%	7
	Average		0.0%	4,079
Gold	1329.1	1.25	0.1%
Silver	19.16	0.055	0.3%
Platinum	1055.1	4.1	0.4%
Palladium	666	7	1.1%
	Average PM		0.5%

 

SHFE Prices 06:38 BST	RMB	Change	% Change
Cu	36540	180	0.5%
AL	12050	75	0.6%
Zn	17815	-65	-0.4%
Pb	14040	10	0.1%
Ni	79110	-980	-1.2%
Sn	122790	-1730	-1.4%
Average change (base metals)	0		-0.3%
Rebar	2265	-42	-1.8%
Au	287.85	-0.05	0.0%
Ag	4300	15	0.4%

 

Economic Agenda
BST	Country	Data	Actual	Expected	Previous
12:50am	Japan	BSI Manufacturing Index	2.9	-6.5	-11.1
3:00am	China	Industrial Production y/y	6.3%	6.2%	6.0%
3:00am	China	Fixed Asset Investment ytd/y	8.1%	7.9%	8.1%
3:00am	China	Retail Sales y/y	10.6%	10.2%	10.2%
7:00am	Germany	German Final CPI m/m		0.0%	0.0%
7:00am	Germany	German WPI m/m		0.1%	0.2%
9:00am	Italy	Italian Industrial Production m/m		0.2%	-0.4%
9:30am	UK	CPI y/y		0.7%	0.6%
9:30am	UK	PPI Input m/m		0.6%	3.3%
9:30am	UK	RPI y/y		1.8%	1.9%
9:30am	UK	Core CPI y/y		1.4%	1.3%
9:30am	UK	HPI y/y		8.5%	8.7%
9:30am	UK	PPI Output m/m		0.3%	0.3%
10:00am	EU	ECB President Draghi Speaks
10:00am	Germany	German ZEW Economic Sentiment		2.8	0.5
10:00am	EU	ZEW Economic Sentiment		6.7	4.6
10:00am	EU	Employment Change q/q		0.2%	0.3%
11:00am	US	NFIB Small Business Index		94.9	94.6
6:01pm	US	30-y Bond Auction			2.27|2.2
7:00pm	US	Federal Budget Balance		-98.0B	-112.8B

The post Metals consolidate, despite dovish Fed talk and better Chinese data appeared first on The Bullion Desk.

from The Bullion Desk http://ift.tt/2cVHLuq
via IFTTT