MORNING VIEW: Metals start week on firmer footing but in low volumes due to China holiday

Three-month base metals prices on the London Metal Exchange were up across the board this morning, Monday April 6, as were gold and silver prices.

Continued declines in the daily Covid-19 death tolls reported in Italy and France have lifted hopes that the virus can be brought under control, as seen in China.

  • China’s financial markets are closed on Monday for a public holiday, but other Asian-Pacific equity indices were up significantly.
  • Major pre-market western equity indices were also stronger by 3-4%.

Base metals
Three-month base metals prices on the LME were up across the board by an average of 0.7%, led by a 1.3% rise in copper, which was recently quoted at $4,903.50 per tonne. Aluminium was little changed at $1,480 per tonne and tin was up by 0.3% at $14,165 per tonne, while the rest were up by around 0.8% - see table below for more detail.

Volume on the LME was low however, with just 1,514 lots traded as at 6.53 am London time. While volumes had fallen last week, they were particularly low today due to China being on holiday.

Precious metals
The spot gold price was firmer this morning, up by 0.4% at $1,624.56 per oz, as were the rest of the precious metals, with average gains of 1.1%

All the precious metals seem to be holding in consolidation patterns that could be described as bullish flag patterns on the charts.

Wider markets
The yield on benchmark United States 10-year treasuries was firmer this morning and was recently quoted at 0.63%, compared with 0.59% at a similar time on Friday.

Asian-Pacific equities were stronger this morning: the Hang Seng (+2.22%), the Nikkei (+4.24%), the ASX 200 (+4.33%) and the Kospi (+3.85%).

Currencies

The dollar index is consolidating after climbing last week, it was recently quoted at 100.57 - this compared with 100.17 at a similar time on Friday morning.

The other major currencies we follow are mixed; sterling (1.2269) is weak after UK Prime Minister Boris Johnson was admitted to hospital with Covid-19, the Australian dollar (0.6040) is consolidating after last week’s weakness, while the euro (1.0817) and the Japanese yen (109.06) are weaker.

Key data
Economic data out on Monday showed Japan’s consumer confidence slipping to 30.9 in March, after a reading of 38.4 in February. Later there is data on German factory orders, EU investor confidence, UK construction purchasing managers index and UK hosing equity withdrawals.

Today’s key themes and views

Aluminium is looking the weakest of the base metals, while lead and tin - although well off the lows - are drifting. Meanwhile, copper, zinc and nickel are consolidating. Overall, the markets seem to be waiting to see first whether countries that have been hit hard by the virus can get it under control as has generally been seen in China; and second whether China and other countries can avoid second waves of the virus becoming an issue, which could frustrate efforts to get people back to work.

Our view on gold is unchanged; we expect more investors will want to increase exposure to gold given all the fiscal and monetary stimulus that has been done around the world.




William Adams

william.adams@fastmarkets.com

Published

William Adams

April 06, 2020

08:04 GMT

London