METALS MORNING VIEW 22/12: Metals prices edge higher having found support, helped by a weaker dollar

The three-month base metals prices on the London Metal Exchange were mainly firmer this morning, Friday December 21, the exception being nickel which was down by 0.5%.

Copper, aluminium, zinc and tin were up by between 0.2% and 0.3%, with lead little changed. The three-month copper price was up by 0.2% at $6,032 per tonne.

Volume across the complex has been below average with 4,508 lots traded as at 7.41am London time.

Gold and silver prices were consolidating Thursday’s gains this morning, with gold recently quoted at $1,261.21 per oz, while platinum prices continue to firm and were up by 0.5% at $796.80 per oz. Palladium remains in high ground at $1,265 per oz.

In China this morning, the base metals prices on the Shanghai Futures Exchange were mixed with copper, aluminium, zinc and tin prices firmer by between 0.3% and 0.7%, with February copper up by 0.5% at 48,410 yuan ($7,021) per tonne, while February lead and May nickel were off by 0.2% and 0.1% respectively.

Spot copper prices in Changjiang were up by 0.3% at 48,460-48,250 yuan per tonne and the LME/Shanghai copper arbitrage ratio was recently at 8.02.

The yield on US 10-year treasuries has firmed again, which suggests a degree of risk-on – it was recently quoted at 2.8000%. The yields on the US 2-year and 5-year treasuries remain inverted at 2.6716% and 2.6673% respectively. The German 10-year bund yield was also firmer at 0.2460%.

Asian equity markets have been broadly weak on Friday: the Nikkei (-1.11%), the Kospi (0.07%), the ASX 200 (-0.69%), the CSI 300 (-1.24%) and the Hang Seng (0.53%).

This morning’s performance follows a weak performance in western markets on Thursday; in the United States, the Dow Jones Industrial Average closed down by 1.99% at 22,859.60, while in Europe, the Euro Stoxx 50 was down by 1.68% at 3,000.06.

The dollar index has continued to ease and was recently quoted at 96.32. Out of the other major currencies we follow, the euro and sterling are firmer at 1.1468 and 1.2683 respectively, while the yen and the Australian dollar are consolidating at 111.27 and 0.7110 respectively.

The yuan is weaker at 6.9017, while the other emerging market currencies we follow are for the most part firmer, albeit in low ground, on the back of the weaker dollar.

On the economic agenda on Friday, data already out shows UK GfK consumer confidence came in at -14 after a previous reading of -13, while German GfK consumer climate was unchanged at 10.4. Data out later includes French consumer spending, with UK data including the current account, gross domestic product (GDP), public sector borrowing, business inventory and there is also a Bank of England quarterly bulletin. US data includes, durable goods orders, GDP, GDP prices, consumer confidence, personal spending and income and revised University of Michigan consumer sentiment and inflation expectations.

In addition to the economic data there is also a standoff between US President Donald Trump and Congress that could lead to a partial closure of the federal government.

The lower price levels in copper and aluminium have found support and prices are getting some lift, while the rest of the base metals complex remains range bound. The mood in the market continues to be depressed and the path of least resistance is sideways to lower while the market waits for some concrete progress on trade. The concern is that the longer the wait for a trade agreement, and it has already been a long wait, the greater the risk of global growth slowing as businesses hold-off making capex decisions.

The steady rise in gold prices suggests a pick-up in haven buying while investors reduce exposure in the other markets that are correcting.

London Metal Exchange, base metals prices, precious metals prices

Shanghai Futures Exchange, base metals prices, precious metals prices

economic data

William Adams

william.adams@fastmarkets.com

Published

William Adams

December 21, 2018

09:15 GMT

London