MORNING VIEW: Rising nickel prices, China stimulus provide boost to most base metals

While nickel is in the spotlight, the rest of the base metals are still being pulled and pushed by the combination of higher tariffs on US imports of Chinese goods and China’s plans to support its economy with further spending on infrastructure.

Chinese manufacturing data also showed mixed results with the official purchasing managers index (PMI) falling to 49.5 from 49.7, while the Caixin manufacturing PMI climbed to 50.4 from 49.9. In other Asian data, Japan’s manufacturing PMI slipped to 49.3, from 49.5.

  • China’s CSI 300 was up 1.3%, while other Asian equities were lower.
  • Nickel prices were up 4.7%, at $18,750 per tonne, this after a 9.1% rise on Friday.
  • US markets closed for Labor Day.

Base metals
Three-month base metals prices on the London Metal Exchange were mixed during morning trading on Monday September 2 but nickel continues to steam higher following news that Indonesia will reintroduce the ban on ore exports at the start of 2020, two years ahead of schedule.

Although this has been rumored for some time, it is expected to have a long lasting effect and may well take nickel prices to a new trading level.

Copper and zinc were both up by 0.5% compared with Friday’s close, with copper at $5,681 per tonne and tin prices were up 0.8%, while aluminium and lead were off by 0.2% and 0.1% respectively.

In China, the November nickel contract price was up by 6%, the January tin price was up by 4.1%, while the rest were largely weaker: October aluminium (+0.6%), October zinc (-0.7%), October lead (-0.4%) and October copper was off by 0.2% at 46,660 yuan ($6,519) per tonne.

The spot copper price in Changjiang was also down by 0.2% at 46,560-46,630 yuan per tonne and the LME/Shanghai copper arbitrage ratio moved up to 8.2, compared with 8.18 on Friday.

Precious metals
The spot gold price was recently quoted at $1,522.16 per oz, little changed from Friday’s close, but down from last week’s high at $1,550.40 per oz. The silver price is consolidating too and was recently quoted at $18.31 per oz, down from August 29’s high of $18.65 per oz. The spot platinum price continues to strengthen, it was recently quoted at $937.90 per oz and the spot palladium price has moved higher too, it was recently quoted at $1,540.50 per oz.

Wider markets
The spot Brent crude oil price was recently quoted at $59.14 per barrel, the price has become range bound between $58.30 and 61.48 per barrel.

The yield on benchmark US 10-year treasuries has weakened again, it was recently quoted at 1.4994%, compared with 1.5307% at a similar time on Friday. The German 10-year bund yield is weaker too at -0.6970%, compared with -0.6870% at a similar time on Friday.

In equities, China’s CSI 300 is bucking the trend with a gain of 1.28%, while the rest were mainly weaker on Monday: Nikkei (-0.41%), Hang Seng (-0.73%) and the ASX200 (-0.38%), although the Kospi (+0.07%) is just in positive territory.

This follows a stronger performance in Western markets on Friday: in the United States, the Dow Jones Industrial Average closed up by 0.16% at 26,403.28 and in Europe the Euro Stoxx50 closed up by 0.45% at 3,426.76.

Currencies

The dollar index is firmer and was recently quoted at 98.87, it set a fresh two-year high at 99.03 on Friday. The yen (106.27) is fairly flat, while the euro (1.0985) sterling (1.2153) and the Australian dollar (0.6728) are weaker.

The yuan has turned weaker again and was recently at 7.1663 compared with 7.14550 at a similar time on Friday.

Key data
Today’s economic data is focused on manufacturing PMI, with further data out across Europe and the United Kingdom, although US PMI data will be delayed until Tuesday due to the Labor Day holiday.

Today’s key themes and views
The rebound in nickel seems to be attracting some buying across the other base metals, especially tin, but tin has been the main metal burying itself in recent months. Perhaps with Indonesia a major tin producer, the market is worried that the government may take action to support tin prices too. The fact the metals do not seem to be reacting negatively to the latest round of tariff increases also suggests the impact of the trade war has largely been discounted now and there is potential for some upside amid expectations of stimulus measures being implemented.

Gold prices are consolidating and any relief in other markets could lead to some profit-taking in the yellow metal, but we should once again get a feel for how strong underlying sentiment is by seeing how deep any pullback goes in gold.

base metals
precious metals

macroeconomic data

William Adams

william.adams@fastmarkets.com

Published

William Adams

September 02, 2019

09:38 GMT

London