MORNING VIEW: Metals prices supported by dovish Fed, strength in broader markets

Base metals prices and global equity indices were holding up in high ground this morning, Thursday April 30, helped by the US Federal Open Market Committee’s message of continued support, an expansion in manufacturing activity at China’s larger factories, a stronger oil price and because state-sponsored inventory buying in China bodes well for the metals.

  • Asian-Pacific and pre-market major western equity indices are all positive, with some showing gains of more than 2.5%.
  • Thursday is a bumper day for economic data including gross domestic product (GDP) out across Europe and unemployment data out in Europe and the United States - so be braced for volatility.

Base metals

Three-month base metals prices on the London Metal Exchange were mixed this morning, copper was the main gainer with a 0.6% rise to $5,278.50 per tonne, while the rest were ranged between being off by 0.2% and up by 0.3% - see table below for details.

Volume on the LME has returned to being light with 4,828 lots traded as at 5.53am London time, compared with an average of 7,443 lots traded at a similar time across last week.

The most-traded base metals contracts on the Shanghai Futures Exchange were mixed this morning; June aluminium, June lead and July tin were down by 0.2%, 0.6% and 1% respectively, while July nickel was a little firmer, June zinc was up by 0.5% and June copper was up by 0.6% at 42,820 yuan ($6,050) per tonne.

Precious metals
Spot gold prices were little changed at $1,711.45 per oz, slightly weaker than where they were at a similar time on Wednesday ($1,712.87 per oz), with the market continuing to consolidate in high ground.

The more industrial precious metals are unchanged to firmer this morning, with prices stuck in consolidation mode. Poor jewelry and auto demand, while gold is struggling to extend gains, are no doubt a headwind for these markets.

Wider markets
The yield on benchmark US 10-year treasuries is unchanged this morning from where it was at a similar time on Wednesday morning, it remains at 0.61%, compared with 0.66% at a similar time on Tuesday.

Asian-Pacific equities were stronger this morning: the Nikkei (+2.76%), the ASX 200 (+2.63%), the Hang Seng (closed), the Kospi (+0.7%) and the China’s CSI 300 (+1.02%).

Currencies
The dollar index is pointing lower, it was recently quoted at 99.53, this after a recent peak of 100.87 on April 24, which in turn was below the 100.94 peak on April 6.

With the dollar on a back foot the other major currencies we follow were either stronger - the Australian dollar (0.6565), the yen (106.47), or consolidating in recent high ground: the euro (1.0868) and sterling (1.2480).

Key data
Thursday is an extremely busy day for data releases - too many to mention individually, see the table below for details. Data already out showed a mixed picture on China’s purchasing managers index (PMI) data with the larger manufacturers still expanding in April with a reading of 50.8, but that was at a slower pace than March’s 52, while the Caixin manufacturing PMI dipped back to 49.4 in April, from 50.1 in March. Non-manufacturing climbed to 53.2 in April, compared with March’s 52.3.

Japan’s preliminary industrial production in March dropped by 3.7%, with February’s reading revised to show a 0.3% decline having earlier showed a 0.4% increase, and the country’s retail sales fell by 4.6% in March, compared with a 1.6% gain in February.

Key data out later includes GDP, unemployment numbers and consumer price index (CPI) data across parts of Europe and German retail sales.

US data includes initial jobless claims, personal income, spending and personal consumption expenditures CPI, the Chicago PMI and natural gas storage numbers.

In addition, the European Central Bank will announcing its interest rate and monetary policies and will hold a press conference.

Today’s key themes and views
Copper is extending gains while the rest are consolidating either in high ground or in mid-ground, but with copper leading the way and the wider markets looking buoyant too there may be more room on the upside, although there may also be some book squaring around the extended weekends with numerous countries having May Day and Labor Day holidays. In addition with so much data out, the market may be reminded how bad things have been.

The prospect of some better demand while parts of economies reopen and Chinese strategic stockpiling, as incentivized by local governments, should be supportive.

Gold prices have pulled back in recent days, though the dips tend to be short-lived. As is the case in other buoyant markets, there may not be any pressing need to chase prices higher, although today's data may change that. Our view toward the yellow metal remains unchanged: with so much uncertainty around, we expect any dips in gold will be well supported and if investors are concerned about the sustainability of equity rebounds then more money may find its way into gold.




William Adams

william.adams@fastmarkets.com

Published

William Adams

April 30, 2020

08:32 GMT

London