MORNING VIEW: LME three-month base metals prices mixed; tin underperforms with 1.3% decline

A wave of risk-on is flowing through broader markets this morning, Monday August 19, on expectations that central banks will provide stimulus going forward to cushion moves toward recession.

The problem is that while this may provide some relief to markets, it is only being done because the global economy is slowing and that is bad for commodity demand.

  • Asian equites are in positive territory, led by a 2.33% gain in the Hang Seng.
  • Gold prices have eased, with spot gold recently quoted at $1,508 per oz.

Base metals

On the London Metal Exchange, three-month base metals prices were mixed. Tin led on the downside with prices down by 1.3% to $16,385 per tonne - the lowest since June 2016. Nickel and zinc were down by 0.3% and 0.45 respectively, while lead was up by 0.1% and aluminium and copper were up by 0.4%, with the latter at $5,778 per tonne.

In China, base metals prices on the Shanghai Futures Exchange were also mixed, September tin led with a 2.4% drop and October aluminium was up by 1%, while October copper was up by 0.3% at 46,590 yuan ($6,614) per tonne.

Spot copper prices in Changjiang were up by 0.1% at 46,410-46,480 yuan per tonne and the LME/Shanghai copper arbitrage ratio was recently at 8.05, compared with 8.07 at a similar time on Friday.

Precious metals

Spot gold prices were weaker at $1,507.92 per oz, compared with Friday’s close at $1,513.25 per oz, silver prices were down by 0.5%, while the platinum group metals were up either side of 0.6%.

On the SHFE, the December gold contract was down by 0.5% and December silver was down by 0.9%.

Wider markets
The spot Brent crude oil price is firmer, up by 1.18% at $59.35 per barrel - its recent range being $55.86 to $61.48 per barrel.

The yield on benchmark US 10-year treasuries has edged higher, it was recently quoted at 1.5808% having been at 1.5486% at a similar time on Friday. The German 10-year bund yield is also firmer at -0.6690%, compared with -0.7070% at a similar time on Friday.

In equities, Asian indices were broadly stronger on Monday: Nikkei (+0.71%), Hang Seng (+2.32%), Kospi (-0.58%), the CSI 300 (+2.17%) and the ASX200 (+0.66%).

This follows a stronger performance in Western markets on Friday: in the United States, the Dow Jones Industrial Average closed up by 1.2% at 25,886.01 and in Europe the Euro Stoxx50 closed up by 1.41% at 3,329.08.

Currencies
The dollar index is consolidating and was recently quoted at 98.15 - the recent range being 97.21-98.94. The yen (106.38) has eased from recent strength at 105.05, the euro (1.1104) is slightly firmer and sterling (1.2128) and the Australian dollar (0.6783) are consolidating.

The yuan remains weaken and was recently at 7.0452 and most emerging currencies we follow remain on a back footing.

Key data

On the economic agenda today there is data on the European Union consumer price index (CPI) and a German Bundesbank monthly report is expected too.

Today’s key themes and views

Apart from nickel that is being driven higher on short-covering in China and buying the rumor that Indonesia may bring forward the reintroduction of a ban on the export of ores. The other base metals are either oscillating sideways, or in the case of tin, plunging. The weakness in tin seems to be demand driven with the electronics market appearing to be in the doldrums.

Friday’s University of Michigan consumer sentiment data dropped to 92.1, from 98.4 and was well below the 97.2 expected - perhaps this may send a signal to US President Donald Trump that a new trade deal may be needed before slow global growth drags the US down with it.

Given the stress from geopolitical issues, world trade and global economic growth, gold is likely to remain sought after, but we would expect profit-taking sell-offs along the way. Key to how robust the bull market in gold will be how well the dip is supported.

base metals
precious metals

macroeconomic data

William Adams

william.adams@fastmarkets.com

Published

William Adams

August 19, 2019

10:00 GMT

London