MORNING VIEW: Markets expected to remain choppy while they wait for key decisions

Base metal markets have become more mixed this week with copper and tin running higher, zinc, lead and nickel consolidating just above low ground and aluminium oscillating sideways.

Broader markets that have been seeing more risk-on are now consolidating while they wait for some key political decisions on the United Kingdom’s general election, and its ramifications for Brexit, and on the United States’ decision on whether to implement 15% tariffs on another $160 billion of Chinese imports.

  • Western equities ended lower on Monday December 9 and Asian equities are mixed this morning.
  • Ahead of key political decisions there is a considerable amount of important economic data over the rest of the week, so trading is expected to be choppy.

Base metals
Three-month base metals prices on the London Metal Exchange were mixed on Tuesday morning, with nickel leading on the downside with a 1.1% fall, while tin continues to press on with its rally and was up by 0.6% at $17,200 per tonne. The rest of the complex were little changed, with copper off by 0.2% at $6,070 per tonne.

Trading volume has been average with 4,292 lots traded as at 6.35am London time.

In China, the most-traded base metals contracts on the Shanghai Futures Exchange were for the most part stronger. Similar to the LME, February nickel was the metal showing the most weakness with prices down by 1.5%, while the rest were up by an average of 0.6%, led by a 1.3% increase in February copper to 48,650 yuan ($6,911) per tonne.

The spot copper price in Changjiang was up by 0.6% at 48,400-48,460 yuan per tonne and the LME/Shanghai copper arbitrage ratio was at 8.02, having been 8.03 at a similar time on Monday morning.

Precious metals
The precious metals were up by an average of 0.4%, with platinum and palladium doing most of the running, with gains of 0.9% and 0.45 respectively, while spot silver and gold were up by 0.2% and 0.1% respectively, with gold recently quoted at $1,462.94 per oz.

Wider markets
The spot Brent crude oil price is consolidating recent gains, it was recently up by 0.17% at $64.14 per barrel, compared with Monday’s close.

The yield on benchmark US 10-year treasuries has slipped as the market focuses on the next tariff decision. It was recently quoted at 1.8190% compared with around 1.8232% at a similar time Monday. The German 10-year bund yield was also slightly weaker and was recently quoted at -0.3050%, compared with -0.3000% at a similar time on Monday.

Asian equities were mixed: the Nikkei (-0.09%), the Hang Seng (-0.11%), the ASX 200 (-0.34%), China’s CSI 300 (+0.13%) and the Kospi (+0.45%).

This follows a weaker performance in Western markets on Monday, where in the US, the Dow Jones Industrial Average closed down by 0.38% at 27,909.60; in Europe, the Euro Stoxx50 closed down by 0.55% at 3,672.18.

Currencies
The dollar index is drifting after Friday’s rebound - it was recently quoted at 97.61 compared with last week’s low of 97.35 on December 6 and the recent high at 98.55 on November 29.

The other major currencies we follow are consolidating, the euro (1.1071), sterling (1.3149), the yen (108.62) and the Australian dollar (0.6829).

The yuan, at 7.0353, is also consolidating.

Key data
Today’s economic data schedule is busy: data already out in China showed the consumer price index climb by 4.5%, compared with a 3.8% gain previously, while the producer price index fell by 1.4%, compared with a 1.6% fall previously. French industrial production climbed by 0.4%, which was in line with the previous rise.

Data out later includes Italian industrial production, a host of UK data on production, manufacturing, construction, trade and services, and German and European Union economic sentiment data from economic research institute ZEW.

There is also data out of the US on non-farm productivity, unit labor costs and the National Federation of Independent Business (NFIB) small business index.

Today’s key themes and views
The base metals are looking quite polarized with copper and tin pushing higher and nickel, zinc and lead remaining weak, while aluminium is moving sideways. Given the upcoming US decision on tariffs on Sunday, or a preliminary trade deal ahead of that, it seems likely that the base metals may hunker down until decisions have been made.

Gold prices also seem to be in a waiting pattern until the market knows more about whether the tariff war escalates on Sunday.




William Adams

william.adams@fastmarkets.com

Published

William Adams

December 10, 2019

09:00 GMT

London