MORNING VIEW: Metals start week generally higher, oil strong too

Base metals prices on both the Shanghai Futures Exchange and London Metal Exchange were, for the most part, up across the board on the morning of Monday October 11, along with Asia-Pacific equities.

  • Metals stronger despite strong US treasury yields
  • Brent crude oil approaching $84 per barrel
  • Disappointing US employment report may hold US Federal Reserve back and give inflation a freer hand
Base metals
LME three-month base metals prices were mainly firmer this morning. Zinc, at $3,140 per tonne, was weaker; while lead, at $2,224 per tonne was little changed; but the others were up by an average of 0.6%, led by a 1.1% gain in nickel at $19,375 per tonne, while copper was up by 0.4% at $9,388.50 per tonne.

The most-active base metals contracts on the SHFE were also stronger. Aluminium bucked the trend with a 0.1% decline, while November copper was up by 0.3% at 69,480 yuan ($10,795) per tonne and the rest were up by an average of 1.8%.

Precious metals
Spot gold was little changed at $1,756.03 per oz this morning, with the other precious metals up by an average of 0.2%.

Wider markets
The yield on US 10-year treasuries has pushed the envelope on the upside again and was recently at 1.61%, compared 1.59% at a similar time on Friday.

Asia-Pacific equities were mainly mixed on Monday morning: the Nikkei (+1.48%), the Hang Seng (+1.97%) and CSI 300 (+0.47%), the Kospi (-0.11%) and the ASX 200 (-0.28%).

Currencies
The US Dollar Index was consolidating around 94.08 on Monday morning, slightly weaker than it was at a similar time on Friday (94.28) - the range over recent weeks being 93.67-94.51.

The other major currencies were mixed: sterling (1.3652), the euro (1.1579) and the Australian dollar (0.7334) were firmer, while the Japanese yen (112.68) was weaker.

Key data
Key data already out on Monday showed Japan’s preliminary machine tool orders rose by 71.9% in September, after an 85.2% rise in August.

Other key data out later includes Italian industrial production and an estimate of the United Kingdom's gross domestic product (GDP).

In addition, US Federal Open Market Committee member Charles Evans is scheduled to speak.

Monday’s key themes and views
The metals are once again climbing off recent lows highlighting the ongoing theme that dips continue to be bought and there is little appetite to be short of the metals. Zinc set a fresh multi-year high on Friday, aluminium and tin are within striking distance of doing the same, while lead and nickel - two of the weaker metals of late - are rebounding strongly and copper is climbing within its well-established sideways range.

Gold seems stuck in sideways mode with the prospect of higher bond yields capping the upside - because they increase the opportunity cost of holding gold - while those fearing inflation or increased market turmoil are  providing support.



William Adams

william.adams@fastmarkets.com

Published

William Adams

October 11, 2021

08:42 GMT

London

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