- Market focused on economies that are recovering...
- ...less so on the areas where Covid-19 is raging
Most of the LME three-month base metals prices were higher this morning, the exception was zinc ($2,922.50 per tonne) that was off by 0.2%, while the rest were up by an average of 0.4%, led by a 0.8% rise in nickel ($16,815 per tonne, which looks set to breakout of its two-month sideways trend. Copper was up by 0.6% at $9,837.50 per tonne – the highest it has been since August 2011 and closing in on its all-time high at $10,190 per tonne from February 2011.
The most-active base metals contracts on the SHFE were up across the board this morning with gains averaging 1.7%, skewed by a 3% rise in June nickel prices. But with June copper showing strong gains of 2.4% to 72,030 yuan ($11,099) per tonne recently and June zinc up by 2.2%, the strong gains are widespread.
The precious metals were for the most part little changed, with spot gold up by $0.60 per oz at $1,781.94 per oz. Palladium was the main mover with a 0.5% gain to $2,933 per oz, Monday’s fresh all-time high was $2,944.50 per oz.
The yield on US 10-year treasuries was slightly firmer again this morning and was recently quoted at 1.58%, this after 1.57% at a similar time on Monday.
Asian-Pacific equities were mainly weaker on Tuesday: the ASX 200 (-0.21%), the CSI 300 (-0.07%), the Nikkei (-0.31%) and the Kospi (-0.11%), the exception was the Hang Seng (+0.25%).
The US Dollar Index was consolidating in low ground this morning and was recently quoted at 90.92, this after a 90.67 low on Monday. The index is now in the lower half of the year-to-date range. In the first quarter, the Index rallied from a multi-year low at 89.21 to a high of 93.44.
The other major currencies were mixed this morning: the euro (1.2074) and sterling (1.3892) were consolidating, the Australian dollar (0.7796) was firmer and the yen (108.24) was weaker.
Key economic data already out on Tuesday showed Japan’s core consumer prices (CPI) were flat in March, after a 0.2% decline in February. The Bank of Japan also kept its policy rate at -0.1%, where it has been for years.
Later there is data on realized sales from the Confederation of British Industry and US data on house prices, consumer confidence and the Richmond manufacturing index.
Today’s key themes and views
Copper and aluminium are setting new multi-year highs, zinc and tin are close to following, while lead is accelerating higher and nickel is trying to break higher too. Once again the metals have upward momentum after their period of consolidating during March and the first half of April. The metals were vulnerable while they consolidated, but only nickel was hit hard on the downside, the fact the rest were not hit hard suggests underlying sentiment has remained generally bullish, which means the path of least resistance remains to the upside – even if some of the macro data suggests otherwise.
For now Wall Street seems to have shaken-off concerns over US President Joe Biden’s tax changes, but there is a risk that when the details are signed off by Congress the market has another reaction. We still see the main risk to the metals’ bull market is if equities correct lower.
With other markets looking stronger again, gold’s recent show of strength is consolidating. Demand for other haven assets has also eased – the yen is weaker and treasury yields are firmer.