- The more hawkish stance from the United States Federal Reserve on Wednesday lifted the dollar but has weighed on sentiment...
- ...as has China’s decision to release state reserves of copper, aluminium and zinc to fabricators
LME three-month base metals prices were up by an average of 0.6% this morning, with dip buying emerging after the recent weakness that saw the base metals complex close down by an average of 3.6% on Thursday. Copper prices were at $9,246 per tonne as of 6.15am London time, down by 7.9% compared with Monday’s opening price.
The most-active Shanghai Futures Exchange base metals contracts were, for the most part, weaker, down by an average of 2.9%. The exception was July nickel, which was up by 0.6%.
Interestingly, the non-base metals were not showing weakness, with iron ore on the Dalian Commodity Exchange up by 2.6% and steel rebar on the SHFE up by 2%.
Spot precious metals were also seeing some dip-buying activity on Friday, with the complex up by an average of 1.1% this morning, after some significant losses on Thursday - averaging around 5% for gold, silver and platinum, while palladium was down by 10.8%.
The yield on US 10-year treasuries picked up to 1.51% this morning, having been around 1.46% at a similar time on Monday.
Asia-Pacific equities were mixed on Friday - the Nikkei was -0.2%, the CSI 300 -0.3%, the Kospi +0.25%, the ASX 200 +0.24% and the Hang Seng +0.6%.
The turnaround in the US Dollar Index has been another reason for the battering the metals have suffered and it was recently at 91.99, up from 90.56 at a similar time on Monday.
Most of the major currencies were weaker this morning: Sterling (1.3892), the Australian dollar (0.7536) and the euro (1.1899), while the Japanese yen (110.09) has strengthened.
Data already out on Friday shows that Japan’s national core consumer price index increased by 0.1% in May, reversing the 0.1% fall seen April.
Later today, data will be released on German producer prices, United Kingdom retail sales, the European Union's current account, UK consumer inflation expectations and there is an EU Economic & Financial Affairs Council (Ecofin) meeting.
Today’s key themes and views
After a long time waiting, the metals are now experiencing a more meaningful correction and it will now be interesting to see how strong the underlying sentiment and fundamentals are by seeing how much further prices fall and how long the dip lasts. If the dip is only short-lived, that will tell us sentiment is strong and that the dip is unlikely to derail the overall upward trend.
The sell-off in gold has been sharp, but given the US Fed is not talking about raising rates until 2023, the reaction in gold seems a bit overdone considering the mounting inflationary pressures.