MORNING VIEW: LME base metals mainly higher despite weak Chinese economic data

Base metals prices on the London Metal Exchange largely edged up on the morning of Wednesday September 15 after a day of weakness, but those on the Shanghai Futures Exchange were weaker because they followed movements in London on Tuesday and reacted to weaker Chinese economic data.

  • China retail sales rose by just 2.5% in August after a 8.5% rise in July
  • Chinese industrial production climbed 5.3% in August, down from a 6.4% gain in July
  • Natural gas prices soar to record levels in many countries - more inflationary pressure

Base metals
Three-month base metals prices on the LME rose by an average of 0.2% on Wednesday morning, with lead being the only metal to show weakness - it fell by 0.8% to $2,243 per tonne - while aluminium continued to push higher with a 0.8% rise to $2,854 per tonne. Copper was up by 0.1%, at $9,445 per tonne.

The most-active base metals contracts on the SHFE were mainly weaker on Wednesday morning, with the complex down by an average of 0.7%. October tin bucked the trend with a 0.5% rise, while October aluminium and October lead were both down by 1.6%, while October copper shed 0.6% to 69,870 yuan ($10,842) per tonne.

Precious metals
Precious metals fell across the board, with spot gold prices down by 0.1%, at $1,802.87 per oz, with others fell by an average of 0.6%.

Wider markets
The yield on United States 10-year treasuries has fallen again and was most recently at 1.28%, compared with 1.33% at a similar time on Tuesday, suggesting a bit more risk-off in the air.

Asia-Pacific equities were mainly weaker on Wednesday morning: the Nikkei (-0.52%), the Hang Seng (-1.79%), the CSI 300 (-1.25%) and the ASX 200 (-0.27%) all softened, while the Kospi (+0.15%) edged up.

Currencies
The US Dollar Index held steady on Wednesday morning. It was most recently at 92.58, and has been moving sideways over the past five days.

The other major currencies were consolidating, particularly in the case of the sterling (1.3828) and the euro (1.1808). The Japanese yen (109.53) was strengthened while the Australian dollar (0.7322) weakened.

Key data
Economic data already out on Tuesday, in addition to what has already been mentioned above, included Japan’s core machinery orders that were up by 0.9% in July - after a 1.5% decline in June - and Japan’s tertiary industrial activity that dropped by 0.6% in July - after a 2.2% gain in June. China’s fixed-asset investment rose by 8.9% in the first eight months of 2021, down from 10.3% in January-July. China’s unemployment rate held steady at 5.1%.

Later on Wednesday, United Kingdom data on consumer (CPI), producer (PPI), retail (RPI) and housing (HPI) prices is due for release, as well as leading indicators such as the French CPI, European Union industrial production and US data on Empire State manufacturing, import prices, industrial production, capacity utilization and crude oil inventories.

Wednesday’s key themes and views
Base metals have run into resistance this week, but generally dips do still seem to be attracting scale-down buying, the exception being lead. With some weakness emerging in equities in recent days, it looks like base metals will face headwinds too. China’s weaker economic data would be another potential capping factor unless the Chinese government starts to provide more stimulus.

Gold seems to be stuck between resistance around the $1,834-per-oz level and support at around $1,783 per oz. Generally prices are holding up and if there is more risk-off in broader markets, then gold may benefit.



William Adams

william.adams@fastmarkets.com

Published

William Adams

September 15, 2021

08:45 GMT

London