MORNING VIEW: Supply threats underpin base metals prices; broader markets weaker on Covid-19 spread fears

Asian-Pacific equities and pre-market European equity index futures were weaker this morning, Monday June 29, but base metals prices were for the most part firmer.

  • Nikkei led on the downside this morning with losses of 2.21%.
  • Covid-19 surges in some southern US states, with 2.5 million confirmed cases reported in the country.
  • Profits in China’s industrial sector showed growth of 6% year on year in May, after falling since the beginning of 2020.

Base metals

Three-month base metals prices on the London Metal Exchange were split into three groups with tin the only metal falling, it fell 0.4% to $16,725 per tonne; lead and zinc were little changed, while copper ($5,979 per tonne), aluminium ($1,612 per tonne) and nickel ($12,730 per tonne) were up by 0.6%, 0.9% and 0.5% respectively.

Volume was above average with 6,960 lots traded as of 6.43am London time.

The most-traded base metals contracts on the Shanghai Futures Exchange were mixed, with August tin and August zinc prices down 0.7% and 0.3% respectively, while the rest were up by between 0.5% for October nickel and 1.6% for August lead, while August copper was up by 1.4% at 48,450 yuan ($6,842) per tonne.

Precious metals
Spot gold prices were up by 0.1% this morning at $1,772.71 per oz, and poised just below last week’s multi-year high that was at $1,779.40 per oz. Silver prices are stuck in a sideways range and were recently quoted at $17.86 per oz, while platinum and palladium were firmer by 1.4% at $812.50 per oz and 1.1% at $1,897.50 per oz respectively.

Wider markets
The yield on US 10-year treasuries was weaker at 0.65% this morning, compared with 0.67% at a similar time on Friday - this has been the lowest it has been for a while now.

Asian-Pacific equities were weaker this morning: the Nikkei (-2.21%), the ASX 200 (-1.51%), the Kospi (-1.93%), the Hang Seng (-1.36%) and the CSI 300 (-1.04%).

Currencies
The US dollar index is weaker this morning; it was recently quoted at 97.20, this after 97.42 at a similar time on Friday. Overall, the dollar seems to be consolidating after the fall from the 100 level seen over the March-May period.

The other major currencies were mixed with the yen (107.09) and the Australian dollar (0.6881) consolidating, the euro (1.1261) was firmer, while sterling (1.2380) was trending lower.

Key data out already this morning showed Japan’s retail sales fell by 12.3% year on year in May. Data out later includes German and Spanish consumer price indices, the United Kingdom’s net lending to individuals and mortgage approvals as well as US pending home sales.

In addition, Bank of England Andrew Bailey and UK Monetary Policy Committee member Gertjan Vlieghe are speaking.

Today’s key themes and views
The base metals are for the most part holding up well close to recent rebound highs, but copper is looking the strongest because there are more concerns about red metal supply being affected directly by the Covid-19 virus. In addition, some labor unions in Chile are pressing for better working conditions. With South America a major base metals-producing region, the spread of Covid-19 could well threaten the supply of other base metals too.

Gold prices are holding up just below last June 24’s highs and once again we saw on Friday that dips were well supported. The steady climb in gold suggests investors are increasing their exposure to the yellow metal as insurance in case the stronger run in other asset classes of late falters.





William Adams

william.adams@fastmarkets.com

Published

William Adams

June 29, 2020

08:56 GMT

London