MORNING VIEW: Base metals prices mixed, but overall in consolidation mode ahead of US jobs report

Base metals prices on the London Metal Exchange and Shanghai Futures Exchange were mixed on the morning of Friday September 3, but overall the picture is one of consolidation ahead of today's employment report from the United States.

  • China’s Caixin services PMI dropped to 46.7 in August, from 54.9 in July, switching from expansion to contraction
  • The US Dollar Index continues to retreat
Base metals
Three-month base metals prices on the LME were mixed and for the most part little changed. Those showing losses - aluminium ($2,700 per tonne), nickel ($19,425 per tonne) and tin ($33,425 per tonne) - were down by just 0.1%, while the others were up by an average of 0.3%, with copper up 0.3% at $9,430 per tonne.

The most-active base metals contracts on the SHFE were also mixed. October nickel and tin were down by around 0.6%, while the rest of the October contracts were up by an average of 0.9%, led by a 1.3% rise in zinc. Copper was up by 0.8% at 69,390 yuan ($10,740) per tonne.

Precious metals

Spot gold was up by 0.2% at $1,812.73 per oz, with the other precious metals up by an average of 0.5%.

Wider markets
The yield on US 10-year treasuries has edged higher and was recently at 1.29%, although that was down from 1.3% at a similar time on Thursday.

Asia-Pacific equities were mixed this morning: the Nikkei (+2.05%), the Hang Seng (-0.71%), CSI 300 (-0.55%), the Kospi (+0.79%) and the ASX 200 (+0.5%).

Currencies

The US Dollar Index has been weakening since setting a multi-month high of 93.73 on August 20, and was most recently at 92.24.

The weaker dollar has boosted most of the major currencies: sterling (1.3829), the euro (1.1873) and the Australian dollar (0.7419), while the Japanese yen (110.02) consolidates.

Key data
Later there is data on services PMI across Europe and from the US, but the main focus will be on the US employment report. There is also data on EU retail sales.

Friday’s key themes and views
For now, consolidation and sideways trading seems to enwrap most of the metals, with aluminium the main exception due to production constraints in China driving prices higher. The bigger picture is quite mixed, however, with the slowdown in China being caused by a combination of earlier credit tightness and localized Covid-19 lockdowns, while disruptions to logistics are acting as a double edged sword for the metals: on the one hand, slowing down manufacturing, but on the other, also creating bottlenecks along the supply chain. Given the supply disruptions, we feel the supply chain will carry more stock and that should counter constrained manufacturing output.

Gold prices have recovered well from the early August downward spike and look well placed to push higher, especially as the dollar is showing some weakness. We wait to see what signals the US employment report gives the market.



William Adams

william.adams@fastmarkets.com

Published

William Adams

September 03, 2021

08:18 GMT

London