The mixed performance this morning is widespread with Asian-Pacific and pre-market western equity indices on divergent paths, while oil prices continue to pullback following the rally that got underway in the second half of last week.
- All eyes are on how demand recovers - the fear is it will be slow and protracted.
- Gold prices are weaker and US treasury yields are firmer, suggesting the market is more risk-on than risk-off this morning.
Three-month base metals prices on the London Metal Exchange were mixed this morning, with the two smaller markets of nickel ($12,205 per tonne) and tin ($15,345 per tonne) down by 0.2% and 0.4% respectively, while the other metals were up by an average of 0.5%, led by a 0.9% gain in lead to $1,650.50 per tonne - lead has been one of the laggards in recent weeks. Copper was up by 0.3% at $5,201.50 per tonne.
The most-traded base metals contracts on the Shanghai Futures Exchange were for the most part weaker this morning, with the complex down by an average of 0.5%. June aluminium was the only metal in positive territory, with a 0.9% gain, while the rest are off by an average of 0.8%, led by a 1.4% fall in July nickel, with June tin down by 1.1%. June copper was off by 0.4% at 42,410 yuan ($5,987) per tonne.
Spot gold prices were off by 1% at $1,694.10 per oz, while the market continues to consolidate after strong gains on April 22 and 23 that saw gold reach a high of $1,738.75 per oz - just short of this year’s high of $1,747.25 per oz that was seen on April 14.
The more industrial precious metals are also consolidating and holding within recent ranges.
The yield on benchmark US 10-year treasuries has firmed further and was recently quoted at 0.66% this morning, compared with 0.62% at a similar time on Monday, this suggest investors are more risk-on than risk-off at present.
Asian-Pacific equities were mixed this morning: the Nikkei (-0.15%) and the ASX 200 (-0.55%) were weaker, while the Hang Seng (+0.55%), the Kospi (+0.35%) and the China’s CSI 300 (+0.85%) were firmer.
The dollar index is consolidating, it was recently quoted at 100.08, this after 99.93 at a similar time on Monday.
The other major currencies we follow were also consolidating: the euro (1.0827), the yen (107.21, the Australian dollar (0.6457) and sterling (1.2422).
Data already out on Tuesday showed Japan’s core consumer price index eased to show a 0.1% gain in March, from an increase of 0.2% in February, while the country’s unemployment rate for March rose to 2.5%, from 2.4% in February. Data out later in Europe includes Spain’s unemployment rate and the United Kingdom’s Confederation of British Industry (CBI) realized sales. The latter is expected to drop to -45, from -3 previously.
US data out Tuesday includes goods trade balance, preliminary whole sale inventories, composite house prices, consumer confidence and Richmond manufacturing index, the latter is expected to drop to -42, from 2 previously.
Today’s key themes and views
The markets seem to be consolidating while they wait for further news - key in the weeks ahead will be to see to what extent order flows pick-up while parts of economies start to reopen. But, for the metals, market participants may well focus on Chinese local government incentives to get the supply chain to stockpile metal, some of the numbers being talked about are meaningful. If this coincides with some light restocking by industry as they reopen then that could underpin demand for a while, even if it ends up bringing future demand forward.
Gold prices have once again pulled back from recent high ground, but the trend is still upward. Our view remains unchanged: with so much uncertainty around, we expect any dips in gold will be well supported.