Thursday’s trading was also generally weaker with
copper, aluminium, lead and tin prices down between 0.6% to
1.1%, while zinc was off 0.2% and nickel bucked the trend with
a 1.3% gain to $11,050 per tonne – underpinned by a
net bullish interpretation of the recent changes in nickel ore
supplies from Indonesia and the Philippines.
Precious metals are consolidating this morning either side of
unchanged with spot gold prices at $1,237.89 per oz, but this
is after a bullish day on Thursday, when prices closed up with
gains of between 0.3% and 0.6%.
In Shanghai this morning, the base metals trading on Shanghai
Futures Exchange are weaker with prices down an average of
1.4%, led by a 2.5% drop in lead and a 2.2% fall in aluminium
prices. Copper prices are off 1% at 48,470 yuan per tonne, zinc
and tin prices are down 1.2% and 0.9%, respectively, and nickel
is off the least with a 0.5% fall. Spot copper prices in
Changjiang are off 0.9% at 48,460-48,660 yuan per tonne, a
similar amount to the fall in the futures prices, suggesting
prices started weaker this morning and have remained weak as
profit-taking and scale-up selling emerges into the recent
price strength. The LME/Shanghai copper arb ratio is at 8.09
which suggests the arb window remains closed.
In other metals in China, iron ore prices for the May Dalian
Commodity Exchange contracts are up 0.5%, on SHFE steel rebar
prices are up 1.1%, gold prices are up 0.7% and silver prices
are off 0.1%. So apart from the ferrous part of the market,
industrial metals seem to be consolidating today. In
international markets, spot Brent crude oil prices are little
changed at $55.70 per barrel and US ten year treasuries yields
are around 2.4555%.
The latest equity run higher seems to have stalled with the
Euro Stoxx 50 closing down 0.4% on Thursday and the Dow closed
little changed at 20,620. Asian equities this morning are
weaker with the Nikkei off 0.6%, the Hang Seng and CSI are down
0.4%, the ASX 200 is off 0.2% and the Kospi is off 0.1%.
In FX, the dollar index’s rally appears to have
stalled, it was recently quoted at 100.53, which suggests the
rebound in recent weeks, driven by US tax reform expectations,
may have been just a counter trend move within the downward
trend that has been seen since the start of the year –
that is the chart view at least. But, on a macro view it seems
more likely that interest rate rises and tax reforms will boost
the dollar further – that is if these expectations are
not already baked into the strong dollar that since the US
election has climbed from around 97 to a high of 103.80.
The weaker dollar this morning has led to stronger major
currencies with the euro at 1.0670, the yen is firmer at
113.40, while the sterling and the Australian dollar are flat
at 1.2495 and 0.7697, respectively. The yuan at 6.8658 is
consolidating and most of the other emerging market (EM)
currencies we follow are slightly weaker. Following their
recent show of strength EM currencies seem to be more in tune
with the dollar. The one EM currency we are watching closely is
the rand that is showing strength with its move below 13.0000.
The economic agenda is light with data coming out on the EU
current account, UK retail sales and US leading indicators
– see table below for more details.
The base metals seem to be consolidating recent gains, which in
many of the metals have seen prices at levels not seen since
2015, while nickel and tin prices are consolidating after the
strong rebounds that followed the January sell-offs. We
generally remain bullish for the metals’
fundamentals but need to take into account that many of the
metals prices have already moved a long way and going forward
the market may need to see more evidence of tightness in the
fundamentals, as in seeing exchange stocks fall, before prices
can continue higher.
The precious metals prices, especially gold and silver, are
looking robust – dips have been seen but they have
been shallow and short-lived, even with the dollar showing
strength in recent weeks. We remain bullish for the precious
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change (base metals)
||CB Leading Index