LME base metals prices stronger across the board, suggesting once again dips run into support

Base metals prices on the London Metal Exchange and Shanghai Futures Exchange were up across the board on Wednesday November 3, suggesting dips are once again finding support.

The European Union’s manufacturing purchasing managers’ index (PMI) out on Tuesday at 58.3, while slightly weaker than September’s 58.5, still showed strong expansion, which will be helping to counter the slowdown in China.
  • US total vehicle sales rebounded to an annualized rate of 13 million units in October, from 12.2 million units in September, but still well below April’s 18.5-million-unit peak.
  • China’s Caixin services PMI climbed to 53.8 in October, from 53.4 in September.
  • Markets are waiting for this evening’s announcements from the US Federal Open Market Committee about tapering and a timeline for interest rate rises.
Base metals
Three-month base metals prices on the LME were up by an average of 1.3% this morning, led by a 2% rise in aluminium ($2,734.50 per tonne), with copper up by 1.6% at $9,670 per tonne. Volume was relatively high with 9,852 lots traded as at 6.45am London time.

The most-active base metals contracts on the SHFE were up by an average of 0.7% this morning, led by a 1.2% rise in December copper that was at 70,820 yuan ($11,065) per tonne. December aluminium was up by 1.1%, while December zinc was the laggard with a 0.1% gain.

Precious metals
The precious metals were mixed with spot gold ($1,781 per oz) and silver ($23.48 per oz) down by 0.3% and 0.1% respectively, while platinum was little changed at $1,038.50 per oz and palladium was up by 0.7% at $2,019 per oz.

Wider markets
The yield on US 10-year treasuries has eased and was recently at 1.53%, compared with 1.55% at a similar time on Tuesday.

The Dow Jones set a fresh high on Tuesday, but despite this Asia-Pacific equities were mainly weaker on Wednesday morning: the Nikkei (closed), the Hang Seng (-0.63%), CSI 300 (-0.27%) and the Kospi (-1.25%), while the ASX 200 (+0.93%) bucked the trend.

Currencies

The US Dollar Index has been quite choppy in recent days ahead of the Federal Open Market Committee meeting, which wraps up today; it was recently at 94.08, compared with 93.85 at a similar time on Tuesday.

The other major currencies were generally weaker: sterling (1.3626), the Australian dollar (0.7444), the euro (1.1583) and the Japanese yen (113.88).

Key data
Wednesday’s economic agenda is busy – key data out includes Spanish unemployment change, the United Kingdom’s final services PMI, EU unemployment rate, along with US data on ADP non-farm employment change, final services PMI, factory orders and crude oil inventories.

In addition, European Central Bank president Christine Lagarde and Bank of England governor Andrew Bailey are scheduled to speak.

Wednesday’s key themes and views
As mentioned on Tuesday, while China might be slowing down, Europe and the United States are still in expansion mode that should help support demand for metals, especially while supply chains remain choked. China’s efforts to export more refined copper should help alleviate some of the tightness on the LME, which we may start to see in the weeks ahead once cargoes arrive.

Gold prices remain range-bound; given where the price is, where the dollar, the yen and the Dow are, it does not look as though investors are nervous – we wait to see how the markets react to this week’s central bank announcements.



William Adams

william.adams@fastmarkets.com

Published

William Adams

November 03, 2021

08:55 GMT

London