MORNING VIEW: Base metals prices looking brighter in quiet conditions

Broader markets are looking a bit brighter this morning, Tuesday May 5, with equity indices and base metals prices firmer while participants look forward to better demand once more plans are announced about lifting lockdown restrictions.

  • The Dow Jones Industrial Average reversed from being down by 1.5% to close positively on Monday.
  • US factory orders dropped by 10.3%, but this data was for March; by the time April’s data is released, which is bound to be considerably worse, hopefully things on the ground will be better.
  • Asian-Pacific and pre-market western equity indices are firmer this morning.

Base metals
Three-month base metals prices on the London Metal Exchange were for the most part firmer this morning; aluminium was little changed and nickel was off by 0.2% at $11,920 per tonne, while the rest were up by an average of 0.8% - led by a 1.3% gain in copper, that was trading at $5,172 per tonne as at 6.13am London time.

Precious metals

Spot gold prices were little changed at $1,701.26 per oz this morning, compared with $1,700.22 per oz at a similar time on Monday morning.

The more industrial precious metals were mixed, with silver down by 0.8% at $14.81 per oz, platinum up by 0.8% at 766.30 per oz and palladium down by 2.5% at $1,863.50 per oz. With the industrial precious metals stuck sideways, they are also starting to look a bit heavy.

Wider markets

The yield on benchmark US 10-year treasuries has edged higher; it was recently quoted at 0.63% this morning, compared with 0.61% at a similar time on Monday morning.

Asian-Pacific equities, those that are open, were firmer this morning with the Hang Seng up by 0.76% and the ASX 200 is up by 1.38%.

Currencies

The dollar index is in mid-ground, it was recently quoted at 99.42, this after a low of 98.54 on May 1.

The other major currencies we follow were mixed this morning: the euro (1.0906) is slightly weaker, sterling (1.247) is slightly firmer, as are the Australian dollar (0.64594) and the yen (106.61).

Key data
Tuesday’s economic data includes purchasing managers index (PMI) services data out in the United Kingdom and United States, unemployment data from Spain and producer price index data from the European Union. Other US data includes the trade balance and an economic optimism reading from Investor's Business Daily (IBD), TechnoMetrica Institute of Policy and Politics (TIPP).

In addition, Bundesbank President Jens Weidmann is speaking and Germany’s Constitutional Court will rule on whether the European Central Bank’s purchases of public sector debt have breached the country’s law. If they rule against it, which is unlikely, then it could escalate problems in the EU.

Today’s key themes and views
For now bases seem to be in place across the LME base metals complex and prices seem to be meandering sideways while they wait for fresh news.

The combination of Chinese stockpiling and the prospect for a pick-up in demand, albeit a slow recovery, may well underpin prices and provide some support. There may also be some room for light restocking once order flows pick up. But overall there is still too much uncertainty for confidence to flourish, so range trading is likely to dominate for longer.

Gold prices pulled back last week, but prices are treading water this morning. Our view 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

May 05, 2020

07:54 GMT

London