METALS MORNING VIEW 06/07: Metals quiet, but remain under pressure

Base metals prices are weaker by an average of 0.4% on the London Metal Exchange on the morning of Thursday July 6.

Three-month copper prices are off the least at a 0.1% decline to $5,845 per tonne, while lead and zinc prices are off the most, both falling 0.6%. Volume has been light, with 4,707 lots traded as of 07:00 BST.

This follows a generally down day on Wednesday, when prices dropped an average of 0.4%. Aluminium prices were the only ones to buck the trend, with a 0.2% rise to $1,931 per tonne.

Gold and silver prices are off 0.2% this morning, with spot gold prices at $1,225.29 per oz. Platinum prices are up 0.2% and palladium prices are up 0.6% at $843.90 per oz. This follows falls on Wednesday, when the complex closed down an average of 0.5%. We remain surprised gold prices have not been more buoyant given the pick-up in tension over North Korea’s latest missile test.

On the Shanghai Futures Exchange (SHFE) the metals are down across the board, with prices off an average of 0.9%, ranged between 0.3% declines for aluminium and 1.4% for lead. Copper prices are off 0.9% at 46,800 yuan ($6,877) per tonne. Spot copper prices in Changjiang are off 0.7% at 46,710-46,830 yuan per tonne and the LME/Shanghai copper arb ratio has firmed to 8.00.

September iron ore prices on the Dalian Commodity Exchange are down 0.8% at 468.50 yuan per tonne. On the SHFE, steel rebar prices are down 2%, gold prices are up 0.1% and silver prices are off 0.2%.

In international markets, spot Brent crude oil prices are down 0.1% at $48.27 per barrel and the yield on the US ten-year treasuries is unchanged at 2.33%.

The Euro Stoxx 50 and Dow were little changed yesterday, with the Dow closing at 21,487.17, held back by falling oil prices. There was little sign of market concern surrounding North Korea. The Asian markets are weaker this morning, with the Nikkei off 0.4%, the Hang Seng, CSI 300 and ASX 200 off 0.1% and the Kospi little changed – so again, there is little sign of geopolitical tension being reflected in these markets.

The dollar index, at 96.32, is slightly firmer. The US Federal Open Market Committee (FOMC) meeting minutes showed the Committee was split on when to start reducing the balance sheet, with some wanting it to happen over the next few months, while others argued it should start later in the year. The euro is weaker at 1.1351, as is the Australian dollar at 0.7597, while sterling is flat at 1.2936 and the yen is weaker at 113.24.

The yuan, at 6.8045, is weaker, as are the rand at 13.4228 and the Mexican peso at 18.3630, while the other emerging market currencies we follow are generally flat.

The economic focus today will be on US employment data. Data already out shows German factory orders climbed 1% in May, which was worse than expected, but better than the previous reading. Later there is data out on EU retail sales, US data including Challenger job cuts, ADP non-farm employment change, initial jobless claims, trade balance figures, final services PMI, ISM non-manufacturing PMI and crude oil inventories. In addition, FOMC member Jerome Powell is speaking.

This week is turning out to be a weaker period for most base metals prices with the exception of aluminium, which is holding up well. The others seem to be consolidating the gains seen in recent weeks, but underling tails on the metals’ candlestick charts suggest dip buying is being seen. With the markets appearing to be ignoring the risks surrounding North Korea, a broader risk-off move is being avoided and therefore we will stick to our stance of being quietly bullish for metals prices.

Gold prices have been under pressure of late, and although the dip towards the May low yesterday found some support, the price action suggests the market remains vulnerable. Platinum prices are following gold’s lead, while silver prices breached the May low and remain weak and palladium prices have pulled back from recent highs and are consolidating just above the previous resistance level seen in April at $832 per oz. Although there seems a lot of complacency about North Korea, we do not think the latest developments are going to go away until a solution has been found. As such, we think more of a market reaction lies ahead.

Overnight Performance
BST 07:03 +/- +/- % Lots
Cu 5845 -5.5 -0.1% 1400
Al 1925.5 -5.5 -0.3% 651
Ni 9105 -35 -0.4% 577
Zn 2760.5 -16.5 -0.6% 1622
Pb 2263.5 -14 -0.6% 429
Sn 19700 -65 -0.3% 28
  Average -0.4%        4,707
Gold 1225.29 -2.11 -0.2%  
Silver 16.032 -0.038 -0.2%  
Platinum 909.8 1.8 0.2%  
Palladium 843.9 4.9 0.6%  
  Average PM 0.1%  

SHFE Prices 07:02 BST RMB Change % Change
Cu 46800 -410 -0.9%
AL  14110 -40 -0.3%
Zn 22825 -255 -1.1%
Pb 17450 -240 -1.4%
Ni 74810 -610 -0.8%
Sn 144190 -1180 -0.8%
Average change (base metals)     -0.9%
Rebar 3353 -69 -2.0%
Iron ore 468.5 -4 -0.8%
Au 273 0.4 0.1%
Ag 3888 -9 -0.2%

Economic Agenda
BST Country Data Actual Expected Previous
 7:00am Germany German Factory Orders m/m 1.0% 1.9% -2.1%
9:10am EU  Retail PMI 52
9:30am UK Housing Equity Withdrawal q/q -7.4B -10.2B
12:30pm EU  ECB Monetary Policy Meeting Accounts  
12:30pm US  Challenger Job Cuts y/y 9.7%
1:15pm US  ADP Non-Farm Employment Change 184K 253K
1:30pm US  Unemployment Claims 243K 244K
1:30pm US  Trade Balance -46.3B -47.6B
2:45pm US  Final Services PMI 53 53
3:00pm US  ISM Non-Manufacturing PMI 56.5 56.9
3:00pm US  FOMC Member Powell Speaks  
4:00pm US  Crude Oil Inventories   -2.4M 0.1M


July 06, 2017

08:40 GMT