METALS MORNING VIEW 28/11: Metals prices firmer despite stronger dollar, other headwinds

Despite a firmer dollar, the three-month base metals prices on the London Metal Exchange are up across the board by an average of 0.8% this morning, Wednesday November 28. Nickel and tin are the outperformers with gains of 1.4% and 1.1% respectively.

Copper prices are up by 0.8% at 4$6,160 per tonne. Volume has been average, with 5,147 lots traded as at 6.48am London time.

The precious metals are also slightly firmer this morning, with spot gold at $1,214.60 per oz.

In China this morning, the January contract prices for base metals were mixed with copper at 49,250 yuan ($7,082) per tonne, zinc, lead and nickel up between 0.2% and 1%, but aluminium and tin lower by 0.8% and 0.6% respectively.

Spot copper prices in Changjiang were down by 0.4% at 49,010-49,230 yuan per tonne. The LME/Shanghai copper arbitrage ratio was firmer at 7.99.

In other metals in China, the January iron ore contract on the Dalian Commodity Exchange was up by 1.1% at 472 yuan per tonne. On the SHFE, the January steel rebar contract was also up by 2.2%.

In wider markets, spot Brent crude oil prices were firmer this morning, up by 0.56% at $61.19 per barrel. The yield on US 10-year treasuries was firmer at 3.0626%, while the German 10-year bund yield was weaker at 0.3470%.

Asian equity markets were mainly firmer on Wednesday: the Nikkei  rose by 1.02%, the Hang Seng by 1.24%, the Kospi 0by .42%, and the CSI 300 by 1.24%, although the ASX 200 was off by 0.06%.

This follows mixed performances in western markets last Tuesday; in the United States, the Dow Jones closed up by 0.44% at 24,748.73, while in Europe, the Euro Stoxx 50 was down by 0.2% at 3,166.42. President Donald Trump’s threat to impose a 25% tariff on imported vehicles weighed on European equities on Tuesday. Although in theory this should be neutral for global metal demand, if US buyers have their eyes set on a European vehicle then it could well delay vehicle purchase decisions, as well as have regional implications on metal demand.

The dollar index is pushing further into high ground and was recently quoted at 97.43, closing in on the November 12 high at 97.70. The other major currencies are weaker: yen (113.89), euro (1.1286), the Australian dollar (0.7234) and sterling (1.2746) were consolidating.

The yuan has weakened further and was recently quoted at 6.9538, while the other emerging market currencies we follow are quite mixed.

The economic agenda includes data on German GfK consumer climate, US GDP, goods trade balance, wholesale inventories, new home sales, Richmond manufacturing index and oil inventories. In addition, Federal reserve Chair Jerome Powell is speaking.

While copper prices are for now doing a good job at holding flat, the rest of the complex has been under further downward pressure with tin and aluminium joining nickel in setting fresh lows for the year – or even multi-year lows in the case of tin –, while zinc and lead are back in low ground. The trends and sentiment are looking decidedly bearish.

President Trump and Chinese President Xi Jinping are to meet for dinner at the G20 meeting in Buenos Aires this weekend. Although President Trump has said he is hopeful for a breakthrough in the trade dispute between the two nations, it looks as though progress will only be made if China gives a lot of ground. Moreover, Trump’s trade threats are also being pointed at Europe and other trade allies. With so much in the air, this is one of those times when it is probably best to wait for the outcome of the G20 meeting, rather than to try to second guess it. Needless to say, with the metals’ prices already in low ground the price reaction to constructive news is likely to be greater than to disappointing news, as the latter may already be largely priced in.

Despite the uncertainty over the G20 meeting, gold prices have bowed to the stronger dollar and general weakness in metals, as have silver and platinum, while palladium stands proud amid solid fundamentals.

London Metal Exchange, base metals prices, precious metals prices

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William Adams

william.adams@metalbulletin.com

Published

William Adams

November 28, 2018

09:01 GMT

London