METALS MORNING VIEW 06/02: Base metals start on a weaker footing

Base metals prices on the London Metal Exchange are off an average of 0.2% this morning, Monday February 6.

Three month aluminium prices are down 1.1%, zinc prices are down 0.8% and lead prices are off 0.5%, while the rest of the metals are trending positively with nickel prices up 0.6%, copper prices up 0.4% at $5,791 per tonne and tin prices up 0.3%. Volume has been average with 8,176 lots traded as of 07:05 GMT.

Precious metals are stronger this morning, up by an average of 0.7%, led by a 1.6% rise in palladium prices, platinum prices are up 0.5%, while gold and silver prices are up 0.2% and 0.3%, respectively.

On Friday, the base metals were for the most part weaker, with prices down an average of 1.2%, with aluminium the only metal to buck the trend. Copper and zinc led on the downside with prices off 2.4% and 2.5%, respectively. Precious metals were generally stronger on Friday, gold, silver and platinum prices closing up an average of 0.5%, while palladium dropped by 1.1%.

This morning in Shanghai, lead and nickel prices are up 0.6% and 1.6% respectively, the rest of the complex are down between 0.7% for copper (46,570 yuan per tonne) and 1.7% for zinc. Spot copper in Changjiang, is down 0.5% at 46,440-46,560 yuan per tonne, the spread between spot and the futures is all but level, while the LME/Shanghai copper arb ratio is at 8.04.

In other metals in China, May iron ore prices are down 3.7% on the Dalian Commodity Exchange, on Shanghai Futures Exchange steel rebar prices are down 2.9%, while bullion prices are up around 1%. In international markets, spot Brent crude oil prices are up 0.2% at $56.85 per barrel.

Equities were strong on Friday on the back of a combination of a strong US employment report and US president Donald Trump’s plans to roll back bank regulations. The Euro Stoxx 50 closed up 0.6% and the Dow closed up 0.9%. This morning in Asia, equities are for the most part bullish, with the Nikkei up 0.3%, the Hang Seng is up 0.7%, the Kospi is up 0.2%, the CSI 300 is up 0.1%, while the ASX 200 is off 0.1%.

In FX, the dollar index is treading water at 99.94, the low on Thursday February 2 was 99.23, the euro is drifting at 1.0750, as are the sterling at 1.2471 and the Australian dollar at 0.7657 while the yen is at 112.75. Emerging market currencies are firmer with the yuan at 6.8110, the recent low being around 6.9630 in December.

Other emerging market currencies are generally strengthening, led by the rupee and peso.

Data out this morning shows weak Japanese average cash earnings and China’s Caixin services PMI has dropped to 53.1 from 53.4, but Germany’s factory orders have climbed strongly, up 5.2%. Later there is data out on EU retail PMI, Sentix investor confidence, US labour market conditions and a loan officer survey – see table below for more details.

With copper prices on a back footing again the potential double top dominates the chart, while most of the other metals also appear to have run into resistance levels and are drifting lower too. The exception is nickel, where further supply disruptions are underpinning prices. With most of the metals seeing a weaker start we wait to see how far prices pullback before finding support. Now with the Chinese Lunar New Year holiday behind us and the second quarter ahead, we would not be surprised to see dips well supported and the firmer trends to resume. The market has, however, had to absorb some weaker PMI data in recent days, which maybe is causing a bit of a headwind.

With gold prices back in high ground it does look as though this year’s bull market is still alive, silver and palladium are following gold’s lead, while palladium has generally be trading its own bullish fundamentals.

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

Overnight Performance
GMT 07:05 +/- +/- % Lots
Cu 5791 25 0.4% 1953
Al 1819 -21 -1.1% 2327
Ni 10340 60 0.6% 2059
Zn 2763 -22 -0.8% 1550
Pb 2310 -12 -0.5% 279
Sn 19700 50 0.3% 8
  Average -0.2%         8,176
Gold 1223.13 2.98 0.2%  
Silver 17.54 0.055 0.3%  
Platinum 1006.5 5.5 0.5%  
Palladium 760.2 12.2 1.6%  
  Average PM 0.7%  

SHFE Prices 07:06 GMT RMB Change % Change
Cu 46570 -350 -0.7%
AL  13570 -180 -1.3%
Zn 22395 -395 -1.7%
Pb 18715 115 0.6%
Ni 86010 1350 1.6%
Sn 145500 -1650 -1.1%
Average change (base metals) 0   -0.4%
Rebar 3083 -91 -2.9%
Iron ore 603 -23 -3.7%
Au 274.3 3 1.1%
Ag 4143 38 0.9%

Economic Agenda
GMT Country Data Actual Expected Previous
12:00am Japan Average Cash Earnings y/y 0.1% 0.4% 0.5%
1:45am China Caixin Services PMI 53.1 53.6 53.4
7:00am Germany German Factory Orders m/m 5.2% 0.6% -3.6%
 9:10am EU  Retail PMI     50.4
9:30am EU  Sentix Investor Confidence   16.7 18.2
3:00pm US  Labor Market Conditions Index m/m     -0.3
Tentative US  Loan Officer Survey      


February 06, 2017

09:00 GMT