MORNING VIEW: Metals consolidate while traders await developments on US-China trade, US stimulus

Markets across the board were in consolidation mode this morning, Thursday August 13, with metals and Asian-Pacific equities mixed, while pre-market major western equity index futures were weaker.

Traders seem to be waiting to see if US Congress can agree on a pandemic recovery fund and how the United States-China trade talks go this weekend when they review the phase one trade deal.

  • High volumes of copper and aluminium imports by China suggest the country is stockpiling in the face of supply disruption, scrap shortages and the economic recovery…
  • …the stockpiling may well be front running investor buying that is being spurred by the liquidity rush while central banks and governments pump money into the global economy.

Base metals

Three-month base metals prices on the London Metal Exchange were mixed this morning, the main movers being copper and aluminium that rose by 0.8% to $6,383 per tonne and 0.4% to $1,791.50 per tonne respectively. The rest were little changed.

Likewise, the most-traded base metals contracts on the Shanghai Futures Exchange were also mixed and indeed polarized with September aluminium leading on the upside with a 1.1% gain, followed by September copper that was up by 0.6% at 50,370 yuan ($7,252) per tonne, while September lead and October tin were down by 1% and 1.1% respectively. October nickel was off by 0.1% and September zinc was down by 0.3%.

Precious metals

Gold prices spiked lower on Wednesday, with prices falling to a low of $1,864.25 per oz, but this morning prices were at $1,934.30 per oz - up by 1% from Wednesday’s close.

The other precious metals were also rebounding this morning, with silver up by 2.5% at $25.93 per oz, platinum up by 1.5% at $938.50 per oz and palladium up by 0.9% at $2,167.50 per oz.

Wider markets

The US 10-year treasuries yield was at 0.66% this morning, unchanged from a similar time on Wednesday. The firmer yield than of late suggests risk-on, we wait to see if the yield can hold above its recent 0.5-0.6% range.

Asian-Pacific equities were mixed this morning: the CSI 300 (-0.31%), the ASX 200 (-0.67%), the Hang Seng (-0.19%), the Nikkei (+1.78%) and the Kospi (+0.21%).

Currencies

The dollar index failed to break higher by moving above 94 and is now under pressure again, recently quoted at 93.18.

Conversely, the other main currencies were firmer: the euro (1.1827), the Australian dollar (0.7169), the yen (106.71) and sterling (1.3068).

Key data
Key data already out this morning showed Japan’s producer price index fell by 0.9% year on year in July, this was an improvement on the 1.6% fall in June. German consumer prices fell by 0.5% month on month in July, this after a similar fall in June, while wholesale prices climbed by 0.5% in July, after a 0.6% rise in June.

Later there is US data on initial jobless claims and import prices.

Today’s key themes and views

The base metals are looking toppy, but the sell-offs seen in copper and lead last week attracted enough buying to give prices a boost back toward the upper levels of their ranges, which suggests keen dip buying-interest.

So although the complex does look toppy and ripe for a correction, there may be enough buying interest to hold prices up and therefore that would suggest the lost upward momentum are just pauses. Overall, if we get pullbacks, we do not think they will last long. We remain bullish in the medium term given the amount of money that has been pumped into the financial system and into infrastructure projects.

We remain overall bullish on gold. The sharp spike lower on Tuesday and Wednesday attracted dip-buying, and while there may well be more choppiness in the short term, overall we expect the bull market to continue given all the uncertainty and liquidity in the financial system.




William Adams

william.adams@fastmarkets.com

Published

William Adams

August 13, 2020

09:17 GMT

London