MORNING VIEW: LME base metals prices mixed, gold prices weaker as optimism for trade deal picks up

Another wave of optimism regarding United States-China trade talks has boosted broader markets and weakened havens, but the base metals have not taken much notice.

  • Asian equities stronger led by a 1.3% rise in the Hang Seng.

Base metals
Three-month base metals prices on the London Metal Exchange were mixed this morning, Monday November 25. Nickel was the main mover with a 0.7% fall to $14,540 per tonne from its close on Friday, while zinc was up by 0.4% at $2,316.50 per tonne and copper was up by 0.2% at $5,862.50 per tonne.

Traded volume has been below average with 3,026 lots traded as at 7am London time.

In China, the most-traded base metals contracts on the Shanghai Futures Exchange were also mixed; January copper led on the upside with a 0.4% gain to 47,090 yuan ($6,689) per tonne, while January aluminium led on the downside with a 0.3% fall to 13,805 yuan per tonne.

The spot copper price in Changjiang was down by 0.5% at 47,120-47,200 yuan per tonne and the LME/Shanghai copper arbitrage ratio was recently at 8.03, compared with 8.05 at a similar time on Friday.

Precious metals
The precious metals are mixed this morning with spot gold and silver down by 0.2% and 0.6% respectively, with gold recently quoted at $1,458.70 per oz, while the platinum and palladium were both up by 0.6%.

Wider markets
The spot Brent crude oil price was firm with an increase of 0.27% to $63.74 per barrel, the overall price trend is upward, with the price now up by 13.3% from the early-October low at $56.13 per barrel.

The yield on benchmark US 10-year treasuries has firmed and was recently quoted at 1.7805%, compared with around 1.7693% at a similar time on Friday morning. The German 10-year bund yield was, however, weaker and was recently quoted at -0.3550%, compared with -0.3300% at a similar time on Friday.

Asian equities were firmer this morning: the Nikkei (+0.78%), the Kospi (+1.02%), the Hang Seng (+1.43%), China’s CSI 300 (+0.73%) and the ASX 200 (+0.32%).

This follows a stronger performance in Western markets on Friday, where in the US, the Dow Jones Industrial Average closed up by 0.39% at 27,875.62, and in Europe, where the Euro Stoxx50 closed up by 0.21% at 3,687.32.

Currencies
The dollar index is consolidating and was recently quoted at 98.18, this after Friday’s rebound from 97.81. The index has choppy since early November and has been within a 97.16-to-98.45 range.

Other major currencies we follow are also consolidating having weakened on Friday: the euro (1.1031), sterling (1.2869), the Australian dollar (0.6796) and the yen (108.87).

The yuan, at 7.0320, is little changed from Friday.

Key data
Data out today includes German Ifo business climate, United Kingdom realized sales and Chinese leading indicators.

Today’s key themes and views
It is more of the same for the base metals in that they are not overreacting to the flip-flopping news on US-China trade talks. Friday’s flash purchasing managers' index (PMI) data showed some improvement, which suggests the weakening trend in economic performance may have run its course. If it has and if there is more positive talk over a trade deal then businesses may start to feel more confident and that in turn could lead to restocking.

Gold prices have been falling in recent days and that suggests sentiment is becoming more risk-on - we wait to see if this starts to positively impact the base metals.

base metals
precious metals

macroeconomic data

William Adams

william.adams@fastmarkets.com

Published

William Adams

November 25, 2019

08:53 GMT

London