MORNING VIEW: Broader markets softer, base metals prices mixed while China’s rally continues

With the exception of China’s CSI 300, Asian-Pacific equities and pre-market major western equity futures were weaker this morning, Wednesday July 8, while base metals prices on the London Metal Exchange were little changed and those on the Shanghai Futures Exchange were generally firmer.

We wait to see if the halt in the rise in equities is just a pause, or whether focus is turning to the rapid spread of Covid-19 in the United States and in some other countries, or ahead of earnings season that starts next week.

  • Pre-market major European equity index futures are down by between 0.5% and 1% this morning
  • US Covid-19 cases approach 3 million.

Base metals
Three-month base metals prices on the LME were mixed this morning, but also little changed, with prices ranged between being up by 0.3% for lead ($1,817 per tonne) and down by 0.2% for tin ($16,950 per tonne) and zinc ($2,064 per tonne), while copper was down by $3 per tonne at $6,190 per tonne. Earlier this morning, however, copper set a fresh post-March rebound high at $6,209 per tonne, just $134 lower than the mid-January peak.

The most-traded base metals contracts on the SHFE were mainly firmer this morning, led by a 0.9% rise in August lead and a 0.7% gain in August copper to 49,750 yuan ($7,088) per tonne, while September tin bucked the trend with a 0.6% drop. The rest were little changed.

Precious metals
Spot gold prices were down by 0.1% this morning from Tuesday’s close, but at $1,792.60 per oz, prices were some $10 per oz higher than where they were at a similar time on Tuesday morning.

Silver ($18.31 per oz) was up by 0.3% from Tuesday’s close, with prices still capped by resistance that lies between $18.40 and $18.44 per oz. Platinum ($844.50 per oz) is on course to challenged resistance around $862 per oz and palladium ($1,931.50 per oz) was holding within its sideways trading pattern this morning.

Wider markets
The yield on US 10-year treasuries has slipped to 0.65% this morning, down from 0.67% and 0.69% at similar times on Tuesday and Monday respectively.

Asian-Pacific equities were largely weaker: the Hang Seng (+0.58%), the Nikkei (-0.78%), the Kospi (-0.24%), the Australia’s ASX 200 (-1.54%) but the CSI 300 (+1.98%) was firmer.

Currencies
The US dollar index was edging lower this morning - it was recently quoted at 96.88. The yuan is holding recent gains and was recently quoted at 7.0155.

The other major currencies were mixed: sterling (1.2557) and the euro (1.1284) were stronger, while the Australian dollar (0.6941) and the yen (107.46) were flat.

Key data
There is limited key economic data scheduled for release on Wednesday. Data already out this morning showed Japan’s bank lending rose by 6.2% year on year in June, after a 4.8% gain in May, while the country’s economy watchers sentiment index climbed to 38.8 in June, from 15.5 in May and a low of 7.9 in April.

Data out later from the US includes crude oil inventories and consumer credit.

Today’s key themes and views
With equities opening weaker in Europe, the metals may struggle to continue with the stronger tone of late, but they may be underpinned while the spread of Covid-19 in a number of metal-mining countries continues to affect supply.

Despite the overall upward momentum, we are wary about whether the market can hold on to recent gains - they may well not if equities correct.

Gold prices continue to trend higher and seem to be reflecting the current state of uncertainty well – dips continue to be well supported.




William Adams

william.adams@fastmarkets.com

Published

William Adams

July 08, 2020

09:09 GMT

London