Metals’ rallies back in full force

The base metals rallies resumed yesterday with three-month prices closing up with gains averaging 2.2%, led by a 4.1% rise in nickel prices and 3% rise in tin prices, with copper prices up 2.3% at $5,559 per tonne. Precious metals prices were also firmer, led by a 2% rise in spot platinum to $938 per oz, while spot gold prices closed up 0.6 percent at $1,215.95 per oz.

This morning, the base metals prices are up an average 1.3%, led by a 2.2% rise in three-month copper prices to $5,680 per tonne, with the rest up between 0.5% for nickel prices and 1.9% for zinc prices. Volumes have jumped again with 13,083 lots traded as of 06:29 GMT. High volumes and rising prices are a bullish sign.

The precious metals this morning are bullish too, with gains averaging 0.8% across the spot metals, led by 1.1% gains in the PGMs, with silver prices up 1%, while gold prices were up 0.2% at $1,218 per oz.

In Shanghai, the January base metals prices are up an average of 3.5%, led by a 4.6% gain in lead, tin prices are up 4%, the rest are up between 3-3.3%, with copper up 3.2% at Rmb 45,940 per tonne. Spot copper prices in Changjiang are up 2.9% at Rmb 45,710-45,910 per tonne, the contango spread between the spot and the January contract has dropped to an equivalent of just $5 per tonne. The LME/Shanghai copper arb ratio is at 1:8.1, which should mean the arb window is open for some trade.  Last week’s 21,937 tonne increase in SHFE copper stocks suggests it may be.

In other metals in China, January iron ore prices on the Dalian Commodity Exchange are up 5.9%, on SHFE, steel rebar prices are up 5.4%, gold prices are up 0.9% and silver prices are up 1.7%. In international markets, spot Brent crude prices are up 0.8% at $49.37 per barrel.

In equities, the four main US stock indices set fresh record highs yesterday, with the Dow closing up 0.5%, the Euro Stoxx 50 closed up 0.4% and Asia is up across the board too this morning with the Nikkei up 0.3%, the Hang Seng is up 1.4%, the CSI 300 is up 0.6% and the Kospi is 0.9%.

In FX, the dollar index at 100.95 is pulling back to consolidate – that combined with stronger oil prices seem to be providing a better background for the metals. The euro is consolidating at 1.0617, sterling is firmer at 1.2486, the yen is weaker at 111.06 and the aussie is attempted to rebound, recently quoted at 0.7375. The yuan remains weak at 6.9145, as does the rupee at 68.213, the rest of the EMs we follow are consolidating in low ground. Fall-out from Trump’s election win and tough talk on trade may well lead to more stress in EMs in the months ahead, which we would have thought are a possible headwind for the current bullish sentiment.

The economic agenda is fairly light, with UK data on the public sector borrowing requirement, CBI industrial order expectations and MPC member Kristin Forbes is speaking. EU data includes consumer confidence and US data includes existing home sales and Richmond manufacturing index.

It would seem as though the rallies are back in full force after last week’s consolidation. This suggests the combination of better economic data, a more positive attitude coming out of LME Week and then the markets looking on the bright side of Trump’s election win, have caught traders and investors wrong footed and the metals prices are adjusting accordingly. We would run with the rebounds for now, but feel there is a lot of uncertainty ahead and the metals prices are now in danger of running ahead of the fundamentals -but such a situation can last a long time.

The precious metals have corrected, the exception is palladium that is once again acting more like an industrial metal/an equity than it is a precious metal. The stronger dollar and strength in other markets have reduced the need for safe-havens, but given so much uncertainty we would expect dips in precious metals prices to be well supported. 

 

Overnight Performance
GMT	06:29	+/-	+/- %	Lots
Cu	5680	120.5	2.2%	4882
Al	1732.5	14	0.8%	2431
Ni	11425	55	0.5%	1632
Zn	2625	50	1.9%	3443
Pb	2215	37	1.7%	640
Sn	21000	200	1.0%	55
	Average		1.3%	13,083
Gold	1218.01	2.06	0.2%
Silver	16.832	0.172	1.0%
Platinum	947.9	9.9	1.1%
Palladium	732.9	7.9	1.1%
	Average PM		0.8%

 

SHFE Prices 06:29 GMT	RMB	Change	% Change
Cu	45940	1440	3.2%
AL	14210	410	3.0%
Zn	21695	585	2.8%
Pb	18845	825	4.6%
Ni	93170	3000	3.3%
Sn	147450	5620	4.0%
Average change (base metals)	0		3.5%
Rebar	2885	149	5.4%
Au	276.75	2.5	0.9%
Ag	4175	71	1.7%

 

Economic Agenda
GMT	Country	Data	Actual	Expected	Previous
9:30am	UK	Public Sector Net Borrowing		5.9B	10.1B
Tentative	UK	10-y Bond Auction			1.08|2.0
11:00am	UK	CBI Industrial Order Expectations		-9	-17
11:30am	UK	MPC Member Forbes Speaks
3:00pm	EU	Consumer Confidence		-8	-8
3:00pm	US	Existing Home Sales		5.43M	5.47M
3:00pm	US	Richmond Manufacturing Index		1	-4

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