Metals looking more bullish, oil deal helping

The industrial metals are looking bullish, a last minute agreement to cut oil prices by OPEC has given commodities a boost. Yesterday, the base metals climbed an average of one percent led by a 2.3 percent run up in lead to $2,004 – a new high for the year, zinc was up 1.3 percent, copper was up 0.7 percent, while nickel was little changed at $10,700. Precious metals were weak initially but got some lift on the back of the oil agreement, they closed up an average of 0.4 percent, led by a 1.7 percent rise in palladium to $709, platinum and silver closed up 0.1 and 0.2 percent respectively and gold closed off 0.4 percent at $1,322.20, having been as low as $1,308.40.

This morning the base metals are up an average of 0.6 percent with most up between 0.5 percent for zinc and 0.8 percent for aluminium and nickel. Copper is up 0.6 percent at $4,858, while tin lags with a one percent gain to $19,950, which is, however, the highest prices have been all year. Volume has been stronger with 7,147 lots traded, with good volume seen in copper, aluminium nickel and zinc, see table below for more details.

Precious metals are up 0.5 percent on average this morning, led by palladium that is up one percent to $716.10, platinum is up 0.5 percent and silver and gold prices are up 0.2 percent with gold at $1,324.90.

In Shanghai, the base metals are all in positive territory, up an average of 1.6 percent, led by a 2.4 percent rise in lead, followed by a two percent rise in tin, while the rest are up between 1.1 for zinc and 1.5 percent for aluminium. Copper is up 1.2 percent at Rmb 37,880. Spot copper in Changjiang is up 1.1 percent at Rmb 37,900-38,100, the spread is at an equivalent of $33 per tonne and the LME/Shanghai copper arb ratio is at 7.80, which getting closer to reopening the arb window.

In other metals in China, iron ore prices are up 3.6 percent in Dalian, steel rebar is up 2.2 percent, silver is up 0.4 percent and gold prices are off 0.1 percent. In international markets, after oil’s five percent rally yesterday Brent crude is last at $48.67.

Equities recovered yesterday with the Euro Stoxx 50 up 0.7 percent and the Dow closed up 0.6 percent. Asia has followed suit with the Nikkei up 1.5 percent, the ASX 200 is up 1.1 percent, the Kospi is up 0.9 percent, the CSI 300 is up 0.6 percent and the Hang Seng is up 0.4 percent.

In FX, the dollar index is flat at 95.46 as are the euro at 1.1227, sterling at 1.3018, the yen is weaker at 101.55 and the aussie is firm at 0.7685. The yuan is flat at 6.6700, the rouble is firmer at 63.01, as is the ringgit, while the rest are relatively flat.

The economic agenda is busy, Japan’s retail sales disappointed by falling 2.1 percent, later data is out on German and Spanish CPI, German unemployment change, UK M4 money supply and lending and a barrage of US data including final GDP, GDP prices, initial jobless claims, goods trade balance, pending home sales and natural gas storage. There are also a host of central bankers speaking today including Bank of Japan’s Haruhiko Kuroda, FOMC members Esther George, Jerome Powell, Fed Chair Janet Yellen and UK’s MPC member Kristin Forbes – see table below for more details.

The base metals are running higher with copper prices gapping higher this morning, which is a particular sign of strength. With lead and tin setting fresh highs and the others running up to challenge resistance levels the market is looking bullish and we would not be surprised to see the run continue. The next focal point is likely to be on Saturday’s release of Chinese manufacturing PMI – any sign that demand may be improving could add fuel to the rally.

Palladium prices have broken above resistance in recent days and now seem to have set off on another up leg, platinum is struggling to follow as it seems more in tune with gold and silver that have got some lift of yesterday’s lows but look far from bullish. Indeed with other metals looking stronger it may be demand for safe havens eases off for a while that could lead to further long liquidation. That said, if funds start buying oil, then there may be a move back into commodity baskets, which could give gold a lift.

Overnight Performance
BST	06:04	+/-	+/- %	Lots
Cu	4858	27.5	0.6%	2624
Al	1673	13	0.8%	1839
Ni	10790	90	0.8%	1157
Zn	2346	11	0.5%	1035
Pb	2017	13	0.6%	451
Sn	19950	25	0.1%	41
	Average		0.6%	7,147
Gold	1324.88	2.68	0.2%
Silver	19.238	0.033	0.2%
Platinum	1031.5	5.5	0.5%
Palladium	716.1	7.1	1.0%
	Average PM		0.5%

 

SHFE Prices 06:04 BST	RMB	Change	% Change
Cu	37880	450	1.2%
AL	12620	190	1.5%
Zn	18220	200	1.1%
Pb	15030	350	2.4%
Ni	83090	1000	1.2%
Sn	129470	2530	2.0%
Average change (base metals)	0		1.6%
Rebar	2322	50	2.2%
Au	285.7	-0.35	-0.1%
Ag	4296	19	0.4%

 

Economic Agenda
BST	Country	Data	Actual	Expected	Previous
12:50am	Japan	Retail Sales y/y	-2.1%	-1.7%	-0.2%
1:00am	US	FOMC Member George Speaks
All Day	Germany	German Prelim CPI m/m		0.0%	0.0%
7:35am	Japan	BOJ Gov Kuroda Speaks
8:00am	Spain	Spanish Flash CPI y/y		0.1%	-0.1%
8:55am	Germany	German Unemployment Change		-5K	-7K
9:30am	UK	Net Lending to Individuals m/m		4.0B	3.8B
9:30am	UK	M4 Money Supply m/m		0.8%	1.2%
9:30am	UK	Mortgage Approvals		60K	61K
Tentative	Italy	Italian 10-y Bond Auction			1.14|1.4
1:30pm	US	Final GDP q/q		1.3%	1.1%
1:30pm	US	Unemployment Claims		260K	252K
1:30pm	US	Final GDP Price Index q/q		2.3%	2.3%
1:30pm	US	Goods Trade Balance		-62.6B	-58.8B
2:00pm	UK	MPC Member Forbes Speaks
3:00pm	US	FOMC Member Powell Speaks
3:00pm	US	Pending Home Sales m/m		-0.1%	1.3%
3:30pm	US	Natural Gas Storage		57B	52B
9:00pm	US	Fed Chair Yellen Speaks

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