MORNING VIEW: Most LME base metals trying to rebound, but copper struggling

Base metals prices on the London Metal Exchange and Shanghai Futures Exchange were mixed during the morning of Thursday May 27, as were broader markets – are these pauses, or early signs of a stall?

  • More US Federal Open Market Committee (FOMC) members seem to be getting off the fence about talking about tapering
  • Chinese yuan continues to strengthen, is China using the yuan to reduce inflationary pressures?

Base metals
LME three-month base metals prices were split with most metals little changed with gains or losses of between plus and minus 0.3%, with tin untraded and the main mover being nickel that was down by 0.9% at $17,160 per tonne. Copper was up by 0.2% at $9,977 per tonne and has once again struggled to get above $10,000 per tonne.

The most-active Shanghai Futures Exchange base metals contracts were mixed; the July contracts for aluminium, zinc and tin were higher by 0.6%, 0.2% and 0.9% respectively, while lead, nickel and copper were down by 0.1%, 0.3% and 0.3% respectively, with July copper at 71,630 yuan ($11,199) per tonne.

Precious metals
Spot palladium was the main mover in the precious metals camp, with prices up by 0.9% at $2,760.50 per oz, but it has been one of the weaker precious metals of late. The rest were little changed, with spot gold up 0.1% at $1,898.59 per oz.

Wider markets
The yield on US 10-year treasuries has slipped again and was recently quoted at 1.57%, down from 1.58% at a similar time on Wednesday.

Asia-Pacific equities were mixed on Thursday: the Nikkei (-0.56%), the Hang Seng (-0.3%), the ASX 200 (+0.17%), the CSI 300 (+0.02%) and the Kospi (+0.03%).

Currencies
The US Dollar Index rebounded on Wednesday and in early trading this morning, rising to 90.18 at one point – it was recently at 90.03, this after Tuesday’s multi-month low of 89.53.

With the dollar firmer, most of the other major currencies were slightly weaker this morning: sterling (1.4120), the Australian dollar (0.7748), the yen (109.08) and the euro (1.2196).

Key data
Thursday has some key data with German GfK consumer climate and US data on preliminary gross domestic product (GDP), initial jobless claims, durable goods orders, GDP price index and pending home sales.

In addition, UK Monetary Policy Committee member Gertjan Vlieghe and Germany’s Bundesbank president Jens Weidmann are scheduled to speak.

Today’s key themes and views

Most of the base metals have had some success in rebounding in recent days, but for once copper is struggling. As we said on Tuesday, even though prices are getting some lift, it is still too early to say the correction is over, even though it is tempting to do so.

If the pullback is over, then once again it will tell us that underlying sentiment is robust. Broader markets are looking a bit uncertain as to their next direction and with some early signs that the FOMC is starting to broach the subject of tapering, markets may get more nervous.

The fact there are some signs of increased haven demand, with gold generally rising of late and US treasury yields falling, also suggests there is some caution around.


William Adams

william.adams@fastmarkets.com

Published

William Adams

May 27, 2021

07:18 GMT

London