MORNING VIEW: Base metals prices mixed, broader markets generally positive

Base metals prices were mixed on both the London Metal Exchange and the Shanghai Futures Exchange this morning, Monday April 19, while broader markets were generally upbeat, save in India where a surge in Covid-19 infections is weighing on equities.

  • Strength in gold, the yen and weaker bond yields could suggest a pick-up in haven demand...
  • ...but there are few signs of nervousness in equity markets

Base metals
LME three-month base metals prices were mainly firmer this morning, the exception was nickel that was down by 0.1% at $16,165 per tonne, the rest of the metals were up by an average of 0.6%, led by a 1.1% rise in copper that was recently quoted at $9,279.50 per tonne.

While the LME metals were mainly firmer, the most-active base metals contracts on the SHFE were mixed with May zinc, May lead and June tin up by an average of 0.6%, while June nickel, May aluminium and June copper off by an average of 0.7%, with copper down by 0.2% at 68,680 yuan ($10,530) per tonne.

Precious metals

Spot gold prices were down by 0.1% at $1,776.09 per oz this morning, consolidating the gains seen at the end of last week. Spot silver ($25.76 per oz) was down by 0.7% at $25.76 per oz, while platinum ($1,209.50 per oz) and palladium (2,786.30 per oz) were up by 0.9% and 0.4% respectively.

Wider markets
The yield on US 10-year treasuries has dropped to 1.56% this morning, from 1.58% at a similar time on Friday. The recent high was just shy of 1.78% on March 30.

Asian-Pacific equities were mainly stronger on Monday: the CSI 300 (+2.11%), the Hang Seng (+0.64%), the Kospi (+0.1%) and the ASX 200 (+0.14%), while the Nikkei (-0.07%) was slightly weaker and India’s Sensex was down by 2.4%.

Currencies

The US Dollar Index is consolidating this morning, but the overall trend is downward; it was recently at 91.57, after 91.71 at a similar time from Friday.

The other major currencies were mixed this morning with the euro (1.1967) and the Australian dollar (0.7743) consolidating, while sterling (1.3857) and the yen (108.55) were stronger.

Key data

The economic agenda is light today with Japan’s industrial production falling by 1.3% in February. Later there is data out on the European Union’s current account and Germany’s Bundesbank releases its monthly report.

Today’s key themes and views

Most of the LME metals are working higher but are encountering resistance while they approach former highs. Lead is also pushing higher off a lower base, while nickel is holding in a sideways trading pattern well off the February highs. The Philippines’ latest move to lift a ban on new mines may be the latest piece of news holding nickel back.

For now, with the seasonally strong second quarter underway, it looks like buyers are returning to the metals. We still see potential downside risks on the back of credit tightening in China, or as a result of a broader-based equity correction, but the path of least resistance in the metals seems to have once again swung higher.

Gold’s rebound last week looks constructive, we wonder whether there is more to the rally than a reaction to the weaker dollar and weaker bond yields – are investors shifting back into gold in anticipation of a correction in equities?




William Adams

william.adams@fastmarkets.com

Published

William Adams

April 19, 2021

07:30 GMT

London