MORNING VIEW: Base metals prices, broader markets weaker on mixture of poor data, concerns over new Covid-19 clusters

Broader markets were generally weaker this morning, Tuesday May 12, amid concerns about clusters of new Covid-19 infections in the Chinese city of Wuhan and in South Korea, while China’s consumer price index (CPI) and producer price index (PPI) data releases were weaker than expected.

  • Asian-Pacific and pre-market major western equity indices were mainly weaker this morning.

Base metals
Three-month base metals prices on the London Metal Exchange were unchanged or weaker this morning, with prices down by an average of 0.5%, led by a 1.2% fall in nickel to $112,255 per tonne. Lead and zinc were down by around 0.5%, while aluminium and copper were off by 0.2% and 0.3% respectively, with copper recently quoted at $5,270.50 per tonne. Tin was unchanged at $15,275 per tonne.

Volumes have been below average with 4,550 lots traded as of 6.09am London time, this compared with some 10,000 lots traded at a similar time on Monday morning.

Precious metals
Spot gold prices were slightly firmer, up by 0.3% at $1,702.62 per oz, but still holding in a consolidation pattern either side of $1,700 per oz.

While all the precious metals started to look vulnerable on the charts last week, we thought all the uncertainty in the markets should provide support and that seems to be the case now, with some of the precious metals now getting some lift within their ranges.

Wider markets
The yield on benchmark US 10-year treasuries has also been consolidating; it was recently quoted at 0.69% this morning, compared with a range of between 0.61% and 0.71% last week.

Asian-Pacific equities were mainly weaker this morning: the Nikkei (+0.19%), the Kospi (-0.38%), the Hang Seng (-1.47%), China’s CSI 300 (-0.19%) and the ASX 200 (-1.08%).

Currencies
The US dollar index is consolidating recent gains, it was recently quoted at 100.22, the range since the start of April being 98.54 -100.87.

The other major currencies we follow were consolidating this morning: the euro (1.0809), sterling (1.2324), the Australian dollar (0.6468) and the yen (107.41).

Key data
As mentioned above, Chinese CPI and PPI data for April came in lower than expected and below March’s numbers while Japan’s leading indicators also disappointed.

Data out later is focused on the United States with the small business index from the National Federation of Independent Business, CPI and the Federal budget balance.

In addition, US Federal Open Market Committee members Patrick Harker, Randal Quarles and Loretta Mester are speaking today.

Today’s key themes and views
Base metals are consolidating this morning, but have been for the most part over recent days been drifting higher within their relatively high holding patterns. We saw zinc break higher on May 6, and it has held on to most of its gains, and copper followed suit on Monday, but it has struggled to hold on its gains with prices now back in the previous range below $5,300 per tonne.

With the broader markets looking less robust and with some concerns that trade talks between the US and China could get acrimonious again, and while we wait to see how the spread of the virus is contained as lockdowns are eased, all suggests would-be consumers may feel in no hurry to chase prices higher.

Gold prices remain in consolidation mode, where they have been since late April. In this climate full of uncertainty, we expect any dips in gold to 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 12, 2020

08:14 GMT

London