METALS MORNING VIEW 02/05: Metals prices rebound on recovery in volume after China returns

Base metals prices on the London Metal Exchange were for the most part firmer on the morning of Wednesday May 2, with five of the six base metals showing gains averaging 0.6%, while tin bucked the trend with a 0.1% decline. Copper led on the upside with a 1% gain to $6,816 per tonne.

Volume on the LME has rebounded with the return of Chinese participants following public holidays in China on Monday and Tuesday. There were 9,862 lots traded as at 06.27 am London time, this after an average volume of 1,710 lots at a similar time on Monday and Tuesday.

This follows a general day of weakness on Tuesday, when the complex closed down by an average of 0.4%, led by a 1.6% drop in zinc prices. Nickel (+0.8%) was the only metal to show gains on Tuesday.

The precious metals were all in positive territory this morning with gains averaging 0.6%, with gold prices up by 0.3% at $1,308.97 per oz. This after a weak performance on Tuesday when the complex was down by an average of 1.3%. We do wonder how much of the weakness in gold has been the market positioning itself ahead of this afternoon’s US Federal Open Market Committee (FOMC) rate decision and statement.

On the Shanghai Futures Exchange this morning, metals prices were for the most part weaker as they play catch-up having been closed for two days. Lead prices were the only ones in positive territory, with prices up by 1.1%, the rest were weaker with copper prices down by 1.1% at 51,030 yuan ($8,048) per tonne, while the rest saw losses of between 0.3% and 0.5%.

Spot copper prices in Changjiang were down by 1.7% at 50,710-50,850 yuan per tonne – the fact that futures were not off as much as the spot shows buying has come into the market since the spot price was set. The LME/Shanghai copper arbitrage ratio has firmed to 7.49 from 7.44 before the holidays.

In other metals in China, iron ore prices were up by 1.1% at 468.50 yuan per tonne on the Dalian Commodity Exchange. On the SHFE, steel rebar prices were up by 2.8%, while gold and silver prices were off by 0.2% and 0.7% respectively. We take some comfort from the fact basic raw material prices have opened up positively after the May 1 holiday.

In wider markets, spot Brent crude oil prices were weaker, with prices down by 0.21% at $73.18 per barrel, the yield on US 10-year treasuries was slightly firmer at 2.98%, and the German 10-year bund yield was little changed at 0.56%.

The equity markets in Asia are for the most part weaker: Nikkei (-0.22%), Hang Seng (-0.67%), CSI 300 (-0.04%), Kospi (-0.46%), while the ASX 200 is bucking the trend with a 0.59% gain. This follows a weaker performance in western markets on Tuesday, where in the United States the Dow Jones closed down by 0.27% at 24,099.05, and in Europe where the Euro Stoxx 50 closed little changed, off by 0.01% at 3,536.26 – not forgetting that most European equity markets were closed on Tuesday.

The dollar index at 92.44 continues to climb with the index clearly having broken out of a base formation that it has been in for most of the year – up until it broke higher on April 23. Dollar strength has weighed on other currencies: euro (1.1966), yen (109.79), sterling (1.3595) and the Australian dollar (0.7502). The yuan was weaker too at 6.3609, which is testing former support at 6.3625 from February 22. The emerging market currencies we follow were also on a back footing, suggesting some unrest over the stronger dollar and firmer US bond yields, which could increase the cost of servicing debt.

The economic agenda is busy today with data already out showing China’s Caixin manufacturing PMI edge higher to 51.1 from 51 – it was expected to come in at 50.9. Japan’s consumer confidence dipped to 43.6 from 44.3.

Later there is manufacturing PMI data out across Europe, as well as data on Italian and EU unemployment, UK construction, EU and Italian gross domestic product (GDP), with US data including ADP non-farm employment change, crude oil inventories and then this evening’s FOMC rate decision and statement. In addition, Germany’s Bundesbank President Jens Weidmann is speaking.

The base metals have been looking weak and the path of least resistance has been to the downside and that might have been accelerated on Tuesday given the thin trading conditions with China and most of Europe on holiday. Overall, we see the current weakness as being part of the drawn-out adjustment to the bullishness seen in 2016 and 2017, and with economic data now pointing to weaker growth, the markets have lost upward momentum. In turn, lack of upward momentum is leading to stale long liquidation. As such, we do not expect too much until we see better economic data and with that in mind we eagerly wait Europe’s PMI data this morning and the US employment report on Friday.

Precious metals prices are attempting to rebound this morning after a weak performance on Tuesday and overnight that saw gold, silver and platinum prices breach recent support levels. The strong dollar and firmer US treasury yields are a negative for precious metals, as is the general lackluster market condition. There has also been a trend of seeing weakness ahead of FOMC meetings, so we wait to see if gold prices pick up if the FOMC statement does not sound hawkish.

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METALS MORNING VIEW 01/05: Metals prices drift in absence of bullish news

Base metals prices on the London Metal Exchange were mixed in the morning of Tuesday May 1, with copper (-0.7% at $6,775 per tonne), aluminium (-0.2%) and zinc (-0.4%) prices lower, while tin prices are untraded and lead and nickel prices are both up 0.3%.

Chinese markets are closed for a national holiday today, meaning volume has been light with 1,225 lots traded as of 6.24am London time.

This follows a diverse performance on Monday, that saw aluminium and tin prices rise 1.1% and 0.9% respectively, copper prices little changed, while nickel, lead and zinc prices fell 1.4%, 1.4% and 0.6% respectively.

Precious metals prices are down across the board this morning by an average of 0.3%, which has gold at $1,311.43 per oz. This follows weak performance on Monday when prices fell between 0.5-1% across the complex. The lackluster performance in the industrial metals, combined with a firm dollar, are weighing on the precious metals prices.

In wider markets, spot Brent crude oil prices were firmer, with prices up by 0.22% at $74.78 per barrel, the yield on US 10-year treasuries was little changed at 2.96%, and the German 10-year bund yield was easier at 0.56%.

The equity markets in Asia that are open are firmer with the Nikkei up 0.15% and the ASX 200 up by 0.58%. This follows a mixed performance in western markets on Monday, where in the United States the Dow Jones closed down by 0.61% at 24,163.15, and in Europe where the Euro Stoxx 50 closed up by 0.50% at 3,536.52. Most of Europe will be closed today for May Day holidays.

The dollar index remained firm at 91.90, the recent high being 91.99, and it looks as though the dollar is now heading higher having spent most of the year, up until recently, in a sideways base formation. This is likely to prove another headwind for metals prices. Conversely, the other major currencies we follow are on a back footing: euro (1.2067), sterling (1.3752), yen (109.39) and the Australian dollar (0.7539).

The economic agenda is busy today: data already out shows a rebound in Japan’s manufacturing PMI to 53.8 from 53.3; later there is PMI data out in the United Kingdom and the US. Other data being released today includes data on UK money supply and lending, with US data including construction spending, ISM manufacturing prices and total vehicle sales.

The base metals are on a back footing, with copper, zinc and nickel showing weakness, while the rest are just managing to tread water, although they also look vulnerable. We see the weakness as being part of the drawn-out adjustment to the bullishness seen in 2016 and 2017, and with economic data now pointing to weaker growth the markets have lost upward momentum. In turn, lack of upward momentum is leading to stale long liquidation. As such, we do not expect too much until we see better economic data – Japan’s PMI was a step in the right direction and we wait to see what today’s and tomorrow’s PMI data shows. On copper, last Friday’s CFTC data showed short-covering and a low gross short position, while the long position picked up for the second week running, this after a long drawn-out stretch of long liquidation. We wait to see if these are early signs that the funds are getting more interested again.

Precious metals prices are under pressure and support levels in gold around $1,302-1,307 per oz may now be retested. Platinum prices have broken recent support levels, while silver is holding up and palladium prices are retreating, but are still mid-range. It may be that gold prices are doing their usual pre-Federal Open Market Committee (FOMC) meeting sell-off ahead of Wednesday’s FOMC decision and statement.

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METALS MORNING VIEW 30/04: Quiet start to the week with China on holiday

Base metals prices on the London Metal Exchange were for the most part little changed this morning, Monday April 30. Lead, zinc, tin and copper were slightly firmer, with the latter at $6,815 per tonne, while aluminium and nickel were slightly weaker.

With Chinese and Japanese markets closed, volume has been light with 2,195 lots traded as at 07.36 am London time.

This follows a generally weak day on Friday that saw copper, aluminium and nickel prices all fall by more than 2%, tin off by 1.4% and lead and zinc bucking the trend with gains of around 0.2%.

Precious metals prices were broadly weaker this morning with gold ($1,318.25 per oz), silver and platinum prices down by an average of 0.5%, while palladium prices are little changed.

In wider markets, spot Brent crude oil prices were weaker, with prices off by 1.36% at $73.39 per barrel, the yield on US 10-year treasuries was at 2.96%, and the German 10-year bund yield was easier at 0.58%.

The equity markets in Asia that are open are firmer with the Kospi up by 0.92%, the Hang Seng up by 1.46% and the ASX 200 up by 0.49%. Positive developments between North and South Korea have helped boost sentiment. This follows a mixed performance in western markets on Friday, where in the United States the Dow Jones closed off by 0.05% at 24,311.19, and in Europe where the Euro Stoxx 50 closed up by 0.36% at 3,518.78.

The dollar index remained firm at 91.51 and it looks as though the dollar is now heading higher having spent most of the year, up until recently, in a sideways base formation. This is likely to prove another headwind for metals prices. The euro seems to have found some support, it was last at 1.2138, sterling remained under pressure at 1.3766, the yen was consolidating at 109.19, as was the Australian dollar at 0.7560. The weakness in the emerging market currencies we follow appears to have halted for now.

The economic agenda is busy today: data already out shows a mixed picture in China with the official manufacturing purchasing managers’ index (PMI) slipping to 51.4 from 51.5, although it was expected to dip to 51.3. The non-manufacturing PMI climbed to 54.8 from 54.6. Meanwhile, Germany’s retail sales fell by 0.6%, against an expected increase of 0.8%, having fallen by 0.7% previously.

Data out later includes German and Italian consumer price index (CPI), EU money supply and private loans and there is an Ecofin meeting. In the US, there is data on personal income, spending and prices, Chicago PMI and pending home sales.

The base metals are looking weak, although lead and zinc prices have found some dip buying, while the rest continue to look vulnerable as they test support levels. We expect the markets to now take their next direction from the manufacturing PMI data that will emerge over the next two days. If there are signs that growth is slowing further then the metals may well have further to fall. Conversely, better PMI data may help to underpin support levels. Overall we remain quietly bullish, but think it will take a new run of bullish economic data before prices react.

Precious metals are on a back footing, the positive talks between North and South Korea have helped to reduce haven demand, while the firmer dollar is a headwind. For now, the path of least resistance for the precious metals seems to be to the downside.

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METALS MORNING VIEW 27/04: Metals prices continue to see volatility

Base metals prices on the London Metal Exchange were broadly down this morning, Friday April 27, with only aluminium in positive territory – up by 0.8% at $2,289 per tonne. The rest were all lower by an average of 0.3%.

Volume is up from this time on Thursday, but at 4,449 lots as of 06.16 am London time is still below average.

Thursday’s trading started on a weak footing, but most of the metals ended the day in positive territory, which suggested dip buying and support are features of the market.

Precious metals prices were little changed this morning, with gold and silver prices off by 0.1% – with the former at $1,316.54 per oz. Meanwhile, the platinum group metals were both up by 0.1%.

This follows a mixed performance for the precious complex on Thursday when gold, silver and platinum prices were weaker, while palladium prices climbed by 1.2%.

On the Shanghai Futures Exchange this morning, zinc and copper prices were off by 0.1% and 0.3% respectively, with the latter at 51,560 yuan ($8,144) per tonne, while the rest of the complex saw gains of between 0.3% for tin prices and 0.8% for lead prices.

Spot copper prices in Changjiang were off by 0.3% at 51,560-51,710 yuan per tonne and the LME/Shanghai copper arbitrage ratio had firmed to 7.44 from 7.42 on Thursday.

In wider markets, spot Brent crude oil prices were weaker, with prices off by 0.29% at $74.47 per barrel and the yield on US 10-year treasuries had dipped back below 3% at 2.97%, with the German 10-year bund yield also easier at 0.59%.

Equity markets in Asia were generally stronger on Friday with the Nikkei (+0.53%), Kospi (+0.75%), ASX 200 (+0.58%), Hang Seng (+0.37%) all up, while the CSI 300 is weaker by 0.85%. This follows a stronger performance in western markets, where in the United States the Dow Jones closed up by 0.99% at 24,322.34, and in Europe where the Euro Stoxx 50 closed up by 0.58% at 3,506.03. The meeting between North and South Korea and the dip in the US treasury yield below 3%, seemed to provide some support.

The dollar index remained firm at 91.56, whether it will continue to trend higher remains to be seen now that the yield is back below 3%. For now, while the dollar remains strong, the other major currencies remain on a back footing: euro (1.2109), yen (109.26), sterling (1.3925) and the Australian dollar (0.7547). The yuan was also weaker at 6.3335, but the recent weakness across the emerging market currencies we follow appears to have halted for now.

The economic agenda is busy today – data already out in Japan is showing weakness with the consumer price index (CPI) dipping to 0.6% from 0.8%, the unemployment rate holding at 2.5%, industrial production easing to 1.2% from 2%, retail sales falling to 1% from 1.7% and housing starts falling 8.3% after a 2.6% drop previously.

Data out later includes German data on import prices and unemployment; French data on gross domestic product (GDP), consumer spending and CPI; Spanish data on CPI and GDP; UK data on GDP and index of services as well as US data which includes GDP, employment cost index, and revised University of Michigan consumer confidence and inflation expectations. In addition, there is a Eurogroup meeting and Bank of England governor Mark Carney is speaking.

Volatility in aluminium and nickel continues as sanction concerns remain, while zinc prices have become volatile on the back of recent large stock inflows. The rest of the metals seem to be content consolidating. With economic data pointing to softer growth, consumers probably feel in no need to be too active, while lack of upside price progress is likely to be leading to stale long liquidation.

On balance, while the shifting stance on sanctions is likely to keep aluminium, nickel and palladium prices on edge, we expect the other metals to remain rangebound, with a possible downward bias, although we are not bearish per se.

Precious metals are on a back footing, talks between North and South Korea have potential to make the world a safer place, although that could change if the US pulls out of the Iran nuclear deal. A firmer dollar is also a headwind for gold prices. For now, the path of least resistance for the precious metals seems to be to the downside.

Metal Bulletin publishes live futures reports throughout the day, covering major metals exchanges news and prices.

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METALS MORNING VIEW 26/04: Metals prices under pressure from stronger dollar, 3% yields

Base metals prices on the London Metal Exchange were weaker across the board by an average of 0.6% this morning, Thursday April 26.

Aluminium, nickel and zinc led the decline with losses ranged between 0.7% and 1%, while the rest were all down by 0.3%, with the three-month copper price at $6,955 per tonne.

This follows a mixed performance on Wednesday when consolidation set in following recent weeks of volatility that has revolved around the United States’ spat with Russia over sanctions.

Volume has been exceptionally low at 1,609 lots traded as of 05.56 am London time.

Precious metals prices were firmer this morning, with gains ranged between 0.1% for gold ($1,323.55 per oz) and 0.4% for platinum ($11.80 per oz). This follows a day when most prices were weaker on Wednesday, with the complex closing down with average losses of 1%.

On the Shanghai Futures Exchange this morning, metals prices were for the most part weaker – the exception is tin where prices were up by 0.2%. The rest of the base metals were down by an average of 0.8%, although that was skewed by a 2.7% fall in zinc prices. Copper prices were off by 0.2% at 51,640 yuan ($8,170) per tonne.

Spot copper prices in Changjiang are little changed at 51,690-51,890 yuan per tonne and the LME/Shanghai copper arbitrage ratio is at 7.42.

In wider markets, spot Brent crude oil prices remain strong, with prices up by 0.54% at $74.44 per barrel and the yield on US 10-year treasuries is holding above 3% at 3.03%, with the German 10-year bund yield at 0.63%.

Equity markets in Asia were mixed with the Nikkei (+0.46%) and Kospi (1.13%) firmer, while the rest were weaker: ASX 200 (-0.26%), Hang Seng (-0.7%) and CSI 300 (-1.41%). This follows a mixed performance in western markets, where in the US the Dow Jones closed up by 0.25% at 24,083.83, and in Europe where the Euro Stoxx 50 closed down by 0.71% at 3,485.83. We wait to see if the above 3% US treasury yields shake market confidence.

The dollar has been lifted by the stronger bond yields with the dollar index at 91.16, it having broken above the previous peak at 90.94 from March 1. The stronger dollar combined with softer economic growth numbers are likely to remain headwinds for metals prices.

Dollar strength is undermining the earlier strength in other major currencies that are looking weaker: euro (1.2174), yen (109.33), sterling (1.3942) and the Australian dollar (0.7574). The yuan is also weaker at 6.3255 and the tide has turned across the emerging market currencies we follow, which are all showing weaker trends now. This weakness may be an alarm bell we should be listening to.

Data out today includes Germany’s GfK consumer climate, Spanish unemployment, UK high street lending and CBI realized sales and the European Central Bank (ECB) rate decision and press conference. US data includes durable goods orders, initial jobless claims, goods trade balance, wholesale inventories and natural gas storage. With the European Union showing signs of slower growth, the market is likely to listen carefully to what ECB President Mario Draghi has to say.

Ignoring the sanction-induced volatility for now, it does look as though the base metals prices are drifting lower while traders adjust to the strong gains seen in 2016 and 2017. With economic data pointing to softer growth consumers probably feel in no need to be too active, while lack of upside price progress is likely to be leading to stale long liquidation. In addition, those metals that saw prices ramp higher in recent weeks have been met by forward selling judging by the forward price spreads. The 3/27-month spread on LME aluminium averaged $64 per tonne contango in the first quarter, a week ago it had moved out to $135 per tonne backwardation, although it has since fallen to $18 backwardation.

There are now likely to be more cross currents for the markets to come to terms with. Reduced trade tensions could boost confidence in global growth again, but countering that higher bond yields could raise concerns of strong headwinds for global growth as debt servicing becomes more expensive.

Gold and the other precious metals prices are correcting and we put that down to the stronger dollar, with palladium reacting to developments over the Russian sanctions. Silver seems to be continuing to follow gold’s lead, while platinum prices are once again looking the weakest. For now we expect the stronger dollar to remain a headwind, but we expect support levels to hold.

Metal Bulletin publishes live futures reports throughout the day, covering major metals exchanges news and prices.

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METALS MORNING VIEW 24/04: Metals jumpy with prices reacting to strong dollar, latest sanction developments

Base metals prices on the London Metal Exchange are for the most part firmer this morning, Tuesday April 24. The exceptions are aluminium (-0.8%) and tin (-0.1%), while the rest are up by an average of 0.4%, with three-month copper prices up by 0.5% at $6,963 per tonne.

On Monday, the United States Treasury’s decision that it will not impose secondary sanctions on non-US market participants for doing business with Russian supplier Rusal, helped to deflate the recent sanctions bubble.

Volume has been above average with 9,114 lots traded as of 07.46 am London time.

Precious metals prices are firmer this morning, with gains averaging 0.4% – led by a 0.8% rise in palladium prices to $987.50 per oz. This after a sharp correction on Monday following the latest developments on US sanctions against Russia. Gold prices also appear to have found support after their recent correction.

On the Shanghai Futures Exchange this morning, metals prices are split between being little changed and weaker with aluminium and nickel prices catching up with yesterday’s developments, with prices falling by 3.2% and 0.6% respectively, although tin prices are also down by 1.3%. Lead, zinc and copper prices are little changed, with the latter off by 0.1% at 51,650 yuan ($8,186) per tonne.

Spot copper prices in Changjiang are down by 0.4% at 51,560-51,800 yuan per tonne and the LME/Shanghai copper arbitrage ratio is at 7.42.

In wider markets, spot Brent crude oil prices are firmer, up by 0.1% at $75.07 per barrel and the yield on US 10-year treasuries is at 2.96%, with the German 10-year bund yield at 0.62%.

Equity markets in Asia are for the most part considerably stronger after geopolitical tensions seem to have eased between the US and Russia: Nikkei (+0.86%), the ASX 200 (+0.6%), Hang Seng (0.82%), and CSI 300 (1.83%), although the Kospi is bucking the trend with a 0.4% decline. This follows a mixed performance in western markets, where in the US the Dow Jones closed off 0.06% at 24,448.69, and in Europe where the Euro Stoxx 50 closed up 0.54% at 3,513.06. What is interesting is that the equities are not putting a negative spin on the stronger treasury yields.

Recent increases in geopolitical tensions and rising commodity prices, especially oil, seem to have spurred inflationary concerns that have led to stronger bond yields and in turn that has lifted the US dollar, with the dollar index at 90.97. This has broken above the previous peak at 90.94 from March 01.

This rise in the dollar seems to be weighing on gold and is likely to be a headwind for metals’ prices generally. With the dollar stronger, other major currencies are weaker: euro (1.2205), yen (108.85), sterling (1.3932) and the Australian dollar (0.7604). The yuan is also weaker at 6.3155 and the emerging market currencies we follow are all weakening, which may well be a warning sign rising concern about higher US treasury yields. So equities may be benefitting from the short-term relief of weaker currencies, but the weaker currencies may be an alarm bell we should be listening too.

Data out already shows Japan’s core consumer price index (CPI) came in at 0.7%, slightly down from 0.8% previously. Later there is data on German Ifo business climate, UK public sector borrowing and CBI industrial order expectations, with US releases that include data on house prices, consumer confidence, new home sales and the Richmond manufacturing index.

In recent weeks the focus has been on aluminium, nickel, tin, palladium and the oil price, all of which have been affected by the possibility of sanctions and secondary sanctions. The other metals have largely been consolidating, albeit with an upward bias, while they wait for signs of a resumption of concerted global growth. With the sanction bubble somewhat deflated, at least for now, the outperforming metals are correcting and it seems the complex as a whole remains in a sideways trading pattern. There are now likely to be more cross currents for the markets to come to terms with. Reduced trade tensions could boost confidence in global growth again, but countering that higher bond yields could raise concerns of strong headwinds for global growth as debt servicing becomes more expensive.

Gold and the other precious metals prices are correcting and we put that down to the stronger dollar, with palladium reacting to developments over the Russian sanctions. For now we expect the stronger dollar to remain a headwind, but we expect support levels to hold.

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METALS MORNING VIEW 23/04: Bullishness over US sanctions eases; metals prices consolidate

The base metals traded on the London Metal Exchange have kicked off the new trading week with a broadly positive performance this morning, Monday April 23.

Sanction-hit aluminium leads on the upside with a gain of 0.8%, followed by lead, copper and zinc, which are up by 0.7%, 0.6% and 0.4% respectively. Nickel and tin are bucking the uptrend, however, with losses of 0.8% and 0.1% respectively.

With no imminent sign of Rusal-style US sanctions being imposed on Russian nickel producer Nornickel, common sense has seemingly prevailed in the nickel market after the alloying metal got caught in the sanction crossfire, with nickel now unwinding its bullish excess.

On average, the LME base metal prices were up by 0.3% as of 06:33 am London time. But with a relatively low volume of 4,918 lots traded across the complex so far this morning – compared with last week’s average of 8,151 lots – this indicates that the market is in consolidation mode.

In precious metals, the recent demand for the dollar has capped the advances in both gold and silver prices. This morning, gold settled lower at $1,334.80 per oz, while silver managed to hold above $17.00 per oz. With demand for haven assets diminishing, platinum prices have edged lower from last week’s high of $954 per oz and is trading at around $927 per oz. Meanwhile, palladium has so far managed to hold on to most of last week’s gains, up 0.2% at $1,031.80 per oz.

On the Shanghai Futures Exchange, generally upbeat risk appetite in the early Asian trading session provided support to the base metals with prices up by an average of 0.5%. Aluminium prices were unchanged, while nickel (-0.2%) remained under selling pressure. The rest of the metals were higher, led by copper (+1.2%) and lead (+1.2%), with zinc and tin up by 0.8% and 0.1% respectively.

Looking ahead, the seasonally stronger demand in China witnessed during the second quarter of the year is likely to underpin other metals prices too. SHFE rebar prices were up 2.2% at 3,550 yuan ($564) per tonne, while the Dalian Commodity Exchange’s September iron ore contract is up 2% at 476.50 yuan per tonne.

In equities, Asian indices were mostly lower on Monday following a weaker performance in the western markets at the end of last week. The Dow Jones lost around 201 points on Friday, while the Standard & Poor’s 500 Index edged below 2,700 points again. In Asia today, Japan’s Nikkei Index declined by 0.33% and Hong Kong’s Hang Seng Index was down by 0.35%, however the ASX 200 Index in Australia bucked the trend with a gain of 0.29%.

Overnight economic data was light with Japan’s flash manufacturing purchasing managers’ index (PMI) coming in at 53.3, compared with an expected print of 53.4. Later, the market will focus on manufacturing PMI data out across Europe and the US, as well as US existing home sales.

Based on recent price moves, the base metals are trading on the back of their own individual fundamentals. Worries over a supply-crunch in the aluminium market should continue to support the light metal prices, while the rest of the base metals will remain well supported by seasonal pick-up in Chinese demand. The pullback in LME nickel could continue until the metal can find a price equilibrium but we expect dip-buying to resume at a later stage.

With most of the negative risk events priced in, the base metals complex can take comfort that global risk appetite is on the mend. US Treasury Secretary Steven Mnuchin hinted that he is considering a trip to China and is “cautiously optimistic” that the US and China can reach an agreement over the two nations’ recent trade spat.

Easing trade and geopolitical tensions are taking its toll on the demand for haven assets. Clearly the strength in the dollar index is also a contributory factor, after most US Federal Reserve speakers last week maintained the hawkish view that the US economy is strong enough to warrant another interest rate increase. The CME Group’s FedWatch tool recently pointed to a 98.4% probability that interest rate target will move in June from the current rate of 1.5%-1.75% to 1.75%-2%.

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