- Asian-Pacific and pre-market western equity indices were mixed this morning.
- Markets should be braced for more weakness in services purchasing managers’ index (PMI) data out across Europe and for EU retail sales.
- A taste of what is to come seen in UK car sales that fell 97% in April to just 4,321 registrations.
Three-month base metals prices on the LME were firmer this morning, up by an average of 0.4%, led by a 1.1% rise in zinc to $1,941 per tonne, while aluminium and lead lagged behind with gains of $1 per tonne and $2 per tonne to $1,490.50 per tonne and $1,643 per tonne respectively. Copper was up by 0.5% at $5,201.50 per tonne
Spot gold prices were little changed at $1,702.07 per oz this morning, compared with $1,701.26 per oz at a similar time on Tuesday morning. Overall, prices are holding up near high ground, with support evident around $1,670 per oz.
The more industrial precious metals were firmer, with silver up by 0.4% at $15.05 per oz, platinum up by 0.2% at 766.50 per oz and palladium up by 0.5% at $1,810.50 per oz. With the industrial precious metals stuck sideways-to-lower, they are also starting to look a bit heavy on the charts, but countering that, a pick-up in industrial activity should be positive for demand.
The yield on benchmark US 10-year treasuries has edged higher; it was recently quoted at 0.66% this morning, compared with 0.63% and 0.61% at a similar time on Tuesday and Monday respectively - this suggests a slightly more risk-on stance across markets.
Asian-Pacific equities were mainly firmer this morning with the Kospi up by 1.56%, the Hang Seng up by 1.08%, China’s CSI 300 up by 0.1% and the ASX 200 down by 0.32%.
The dollar index is pushing higher again, it was recently quoted at 99.85, which compares with 99.42 at a similar time on Tuesday and after a low of 98.54 on May 1.
The other major currencies we follow were mixed this morning: the euro (1.0825) is weaker following Germany’s constitutional court questioning the legality of European Central Bank bond-buying, sterling (1.2430) and the Australian dollar (0.6442) are consolidating and the yen (106.38) is firmer.
Data out already on Wednesday showed German factory orders fell by 15.6% month on month in March, again we can expect even worse numbers when April’s data is released, although hopefully by that time the news on the ground will be brighter. March’s number was expected to show a 10% drop.
Later there is services PMI data out across Europe, with reading expected in the 9-16 range, plus there is data on UK construction PMI, EU retail sales, US ADP non-farm employment changed and crude oil inventories.
Today’s key themes and views
As we said in Tuesday’s Morning View, “bases seem to be in place across the LME base metals complex” and this morning there seems to be some follow-through buoyancy from Tuesday, when prices closed up across the board with gains averaging 0.8%.
The combination of Chinese stockpiling and the prospect for a pick-up in demand once the United States and Europe follow in China’s footsteps, albeit a slow recovery, may well underpin a gradual pick-up in prices. There may also be some room for light restocking once order flows pick up.
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.