MORNING VIEW: Markets quiet while they consolidate, wait for pointers from central bankers' symposium at Jackson Hole

The drone sound from the markets has not changed - no progress on United States-China trade talks, continued economic headwinds and various simmering geopolitical concerns.

The fact there is more central bank and government talk about monetary easing and the need for stimulus highlights the far from bullish situation the global economy is in and that is reflected in market sentiment

  • Asian equity markets are generally weaker this morning.
  • Market waiting to see if central bankers have fresh ideas to boost growth...
  • …the likelihood is they do not, so we should be braced for disappointment later in the week.

Base metals
On the London Metal Exchange, three-month base metals prices were for the most part firmer while prices consolidated within recent ranges, albeit with the complex quite polarized. Nickel and lead are near the top of their ranges, zinc, copper and tin are near or at the lows and aluminium is more in mid-ground. Copper was up by 0.2% at $5,730 per tonne, compared with Tuesday’s close at $5,717 per tonne.

In China, base metals prices on the Shanghai Futures Exchange were mixed, with the October contracts for copper, aluminium, nickel and zinc, down between 0.3% and 1%, while October lead and January tin were up by 1.2% and 0.8% respectively. October copper was off by 0.6% at 46,380 yuan ($6,570) per tonne.

Spot copper prices in Changjiang were down by 0.6% at 46,320-46,390 yuan per tonne and the LME/Shanghai copper arbitrage ratio was unchanged at 8.09.

Precious metals
Precious metals were down across the board by between 0.1% for platinum and 0.3% for silver, with gold recently quoted at $1,503.52 per oz, down by 0.2% from Tuesday’s close at $1,506.40 per oz.

On the SHFE, the December gold and silver contracts were up by 0.3% and 0.6% respectively, while they reacted to the stronger tone in international markets on Tuesday.

Wider markets
The spot Brent crude oil price is firmer, up by 0.6% at $60.40 per barrel - its recent range being $55.86-61.48 per barrel.

The yield on benchmark US 10-year treasuries is slightly weaker, it was recently quoted at 1.5849% having been at 1.5874% at a similar time on Tuesday. The German 10-year bund yield is weaker at -0.6680%, compared with -0.6590% at a similar time on Tuesday.

In equities, Asian indices were mixed on Wednesday: Nikkei (-0.28%), Hang Seng (+0.01%), Kospi (+0.22%), the ASX200 (-0.94%) and the CSI 300 (-0.15%).

This follows a weaker performance in Western markets on Tuesday: in the United States, the Dow Jones Industrial Average closed down by 0.66% at 25,962.44 and in Europe the Euro Stoxx50 closed down by 0.56% at 3,350.23.

Currencies
The dollar index is consolidating in high ground and was recently quoted at 98.27 - the recent range being 97.21-98.94. The yen (106.54) has eased from recent strength at 105.05, the euro (1.1093) is consolidating in low ground, as are sterling (1.2137) and the Australian dollar (0.677683).

The yuan remains weaken and was recently at 7.0587, and most emerging currencies we follow remain on a back footing, which is a sign of nervousness.

Key data
On the economic agenda for Wednesday there is data on US existing home sales and crude oil inventories. The US Federal Open Market Committee meeting minutes will also be released.

Today’s key themes and views
In the base metals, weak demand dominates where there are not imminent supply concerns. Nickel and lead are upbeat on supply issues/concerns, while the rest are either stuck in downward trends or bouncing along support levels while they wait for fundamental developments, which will either come from a better demand outlook, if a new trade deal is signed, or from production cuts.

Gold prices are consolidating but given the stress from geopolitical issues, world trade and global economic growth, gold is likely to remain sought-after. 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 21, 2019

09:20 GMT

London