METALS MORNING VIEW 11/03: Metals prices turn higher again despite poor economic data

Despite further poor economic data at the end of last week, the three-month base metals prices on the London Metal Exchange were for the most part higher this morning, Monday March 11.

With the exception of tin that was down by 0.2%, the rest of the complex were up between 0.3% for copper and 1.3% for zinc. Copper was recently quoted at $6,414 per tonne, compared with $6,395.50 per tonne at Friday’s close.

Volume was above average with 7,946 lots traded on LME Select as at 07.11am London time, compared with 6,538 lots at a similar time on Friday.

Spot precious metals prices were little changed with gold prices consolidating last Friday’s gains and down by 0.1% at $1,296.91 per oz, compared with $1,298.20 per oz at Friday’s close. Silver and platinum prices were both up by 0.1% and palladium prices were up by 0.2%.

In China, base metals prices on the Shanghai Futures Exchange were mixed with May nickel and May tin down by 0.7% and 0.6% respectively, April lead was unchanged, May copper and May aluminium were up by 0.1% and 0.2% respectively, while May zinc was up 1%. May copper was recently quoted at 49,190 yuan ($7,317) per tonne, compared with Friday’s close at 49,150 yuan per tonne.

The spot copper price in Changjiang was down by 0.1% at 49,510-49,650 yuan per tonne this morning, compared with 49,550-49,690 yuan per tonne on Friday, while the London/Shanghai copper arbitrage ratio was firmer at 7.67 after 7.66 at a similar time on Friday. The backwardation in China continues to attract metal into SHFE warehouses, with 9,120 tonnes of copper being delivered in last week taking stocks to 236,169 tonnes, compared with 108,890 tonnes at the start of the year.

In other metals in China, the May iron ore contract on the Dalian Commodity Exchange was down by 3% at 598 yuan per tonne, compared with 616.50 yuan per tonne at the close on Friday. On the SHFE, the May steel rebar contract was down by 1.6% at 3,723 yuan per tonne, compared with 3,783 yuan per tonne at Friday’s close.

In wider markets, the spot Brent crude oil price was up by 0.73% at $66.14 per barrel, compared with $65.66 per barrel at the close on Friday.

The yield on US 10-year treasuries was firmer, suggesting a pick-up in broader market sentiment, it was recently quoted at 2.6485% after 2.6280% at a similar time on Friday. The yields on the US 2-year and 5-year treasuries remain inverted and were recently quoted at 2.4783% and 2.4455% respectively. The German 10-year bund yield was at 0.0700%, after 0.0600% on Friday morning.

Asian equity markets were mostly firmer on Monday: Nikkei (+0.47%), Hang Seng (+0.83%), the CSI 300 (+1.98%), the Kospi (+0.03%) while the ASX 200 was weaker (-0.38%).

This follows a weaker performance in western markets on Friday; in the United States, the Dow Jones Industrial Average closed down by 0.09% at 25,450.24, and in Europe, the Euro Stoxx 50 closed down by 0.76% at 3,283.60.

The dollar index has pulled back from multi-month highs and was recently quoted at 97.30, the high on March 7 was 97.72, which just overcame the 2018 peaks from November 2018 at 97.70 and December 2018 at 97.71. Friday’s soft US employment report weighed on the dollar.

Conversely the euro (1.1245), sterling (1.3008) and the Australian dollar (0.7049), are rebounding off recent lows, while the Japanese yen (111.26), which has been acting more as a haven currency again is weaker.

The yuan is also weaker and was recently quoted at 6.7243 compared with 6.7234 at a similar time on Friday. Most of the other emerging market currencies we follow are looking slightly firmer after recent weakness.

On the economic agenda, data already out shows German industrial production for January falling by 0.8%, although the revised figure for December 2018 showed it rising 0.8%, having initially been reported down by 0.4%. Data out later includes US retail sales and business inventories, while UK Monetary Policy Committee member Jonathan Haskel is speaking.

This year’s rallies in base metals prices ran out of steam over the past two weeks but Friday’s lows did seem to attract some buying and with sentiment in other markets seeming to be less risk-off than it was last week, we still view the recent weakness as consolidation – at least for now. That said, given the poor economic data and the uncertainty over the United Kingdom’s exit from the European Union in the process known as Brexit, there does not seem to be too much to be bullish about, other than businesses seem to be running with low stocks and the seasonally stronger second quarter is approaching.

Gold prices put in a strong rebound on Friday suggesting stress in the broader markets but the fact the dollar is softer today and that has not seen follow-through interest in gold suggests investors may be looking at bargain hunting into the weakness seen in other markets, which may leave gold more on the sidelines.

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William Adams

william.adams@fastmarkets.com

Published

William Adams

March 11, 2019

09:20 GMT

London