METALS MORNING VIEW 05/04: Slow start to trading with China on holiday; all eyes on Cu stocks, US employment report

Three-month base metals prices on the London Metal Exchange were mixed during morning trading on Friday April 5, while trading has been quiet due to a public holiday in China.

Nickel and tin were both up by 0.2%, aluminium was down by 0.3% and the rest were either unchanged or either side of unchanged – with copper flat at $6,450 per tonne.

Prices for the red metal are holding up relatively well in light of Thursday’s 30,000-tonne stock inflow into LME sheds across several locations.

Volume was well below average with 949 lots traded on LME Select as at 7.03 am London time. This compares with the 5,911 lots traded at a similar time on Thursday.

In precious metals, the spot gold price was down by 0.4% at $1,287.66 per oz after a close of $1,292.75 per oz on Thursday. The rest of the complex were little changed compared with their closes on Thursday, although the price of platinum is holding on to most of yesterday’s gains.

In wider markets, the spot Brent crude oil price was slightly easier, off by 0.13% at $69.18 per barrel from $69.27 per barrel at Thursday’s close.

The yield on US 10-year treasuries was firmer and recently quoted at 2.5288% against 2.5232% at the close on Thursday. The yields on the US 2-year and 5-year treasuries remain inverted – they were recently quoted at 2.3460% and 2.3319% respectively. The German 10-year bund yield was also firmer and has turned positive again, it was recently quoted at 0.0100% after minus 0.0060% at Thursday’s close.

Asian equity markets were mixed on Friday: the Nikkei (+0.38%), the CSI 300 (closed), the Hang Seng (closed), the Kospi (+0.147%) and the ASX 200 (-0.83%).

This follows a firmer performance in western markets on Thursday: in the United States, the Dow Jones Industrial Average closed up by 0.64% at 26,384.63, and in Europe, the Euro Stoxx 50 was up by 0.19% at 3,441.93.

The dollar index has once again run into overhead supply above the 97.50 level, which has capped the upside around five to six times since November 2018. The index was recently quoted at 97.22.

With the dollar consolidating, most of the other major currencies are also consolidating: the euro (1.1232), sterling (1.3097) and the Australian dollar (0.7125), while the Japanese yen (111.67) is slightly weaker.

Economic data already out on Friday shows mixed Japanese numbers with average cash earnings falling by 0.8%, after a 0.6% fall; household spending rising by 1.7%, compared with a previous 2% rise and leading indicators climbing to 97.4%, from an upwardly revised 96.5% – it had previously been 95%.

Meanwhile, German industrial production climbed by 0.7%, an improvement on the 0.8% decline seen previously. This was the first rise in five months.

Data out later includes the French trade balance, data on UK house and a Eurogroup meeting, but the main focus in the market on Friday will be the US employment report. After a low number of new jobs in February (20,000), the market is looking for 170,000 new jobs in March.

For the most part the base metals are holding up well and seem to be waiting for direction from a US-China trade deal, the exception is lead that is looking weak. With German industrial production data turning positive and with that following the turn up in Chinese purchasing managers’ index (PMI) data earlier in the week, perhaps there is room for optimism.

Gold and silver prices have pulled back, but judging by the underlying tails on the candlestick charts the lower prices do seem to be attracting dip-buying. Palladium prices continue to consolidate after their recent correction, but platinum prices have managed to buck the trend with Thursday’s break higher through resistance to reach levels not seen since June last year. The go-it-alone platinum price move on Thursday looks like short-covering.

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April 05, 2019

09:15 GMT