Early rally in base metals prices wanes

Since the start of 2017 there has been a host of economic data out with China’s official PMI data disappointing expectations, while the Caixin PMI data beat expectations, as has most of the European PMI data – see table below.

This morning, January 3, base metals three-month prices are up an average of 0.5%, led by gains in copper and nickel prices that are up 1.3%, with copper prices at $5,587 per tonne, aluminium is up 0.4%, while the rest are little changed. Volume has been above average with 7,163 lots traded. Precious metals are firmer this morning, up an average of 1%, led by a 1.4% rise in silver prices to $16.11 per oz, with platinum prices up 1.2%, while gold and palladium prices are up 0.6% with spot gold prices at $1,158.20 per oz.

In Shanghai, base metals prices are for the most part firmer, up an average of 1.3%, led by a 2.4% gain in tin prices, copper prices are up 1.7% at Rmb 46,210 per tonne, zinc, lead and nickel are up an average of 1.5%, while aluminium prices have bucked the trend with a 0.7% fall. Spot copper prices in Changjiang are up 1.6% at Rmb 45,670-45,870 per tonne, the spread is at an equivalent of $49 per tonne contango and the LME/Shanghai copper arb ratio is strong at 8.26.

In other metals in China, steel rebar prices on SHFE are up 0.5%, while gold and silver prices are down an average of 0.1 and 0.3% respectively.

Equities – the Euro-Stoxx 50 closed up 0.6% on January 2, and this morning Asia has been stronger with the Hang Seng up 0.7%, the CSI 300 is up 0.9%, the ASX 200 is up 1.2% and the Kospi is up 0.9% – the Nikkei remains on holiday. The stronger tones at the start of the year bode well.

In FX, the dollar index is at 102.80, midway between recent highs at 103.65 (Dec 20) and lows at 101.53 (Dec 29). The euro is weaker at 1.0463, as is the yen at 117.67, sterling is at 1.2289 and the aussie if firmer at 0.7219. The yuan remains in weak ground at 6.9344 and most of the emerging market currencies we follow are consolidating, albeit with a slightly weaker bias.

The economic data out in recent days has generally been stronger than expected, the exception being official Chinese PMI data, but that has been countered by the Caixin and European PMI data. Later today we get data on Germany and French CPI, Germany’s unemployment change, UK and US manufacturing PMI and US construction data – see table below for more details.

The base metals prices ended 2016 on a weaker note after prices spent most of December correcting. This morning’s early gains are being eroded so there is no clear direction, although the generally good manufacturing PMI data may well give prices a boost once European trading gathers momentum.

Spot gold prices firmed into the year-end, but the overall trend remains downward – at best we would say prices are consolidating, but if other markets get off to a stronger start then bullion prices may well struggle on the upside – that may change later in the month when geopolitical uncertainty rises ahead of the new US administration taking the helm.

 

Overnight Performance
GMT	06:29	+/-	+/- %	Lots
Cu	5587	71	1.3%	2647
Al	1694.5	6.5	0.4%	829
Ni	10185	130	1.3%	1842
Zn	2568	0	0.0%	1644
Pb	2015	0.5	0.0%	191
Sn	20970	-5	0.0%	10
	Average		0.5%	7,163
Gold	1158.23	7.08	0.6%
Silver	16.105	0.225	1.4%
Platinum	910.7	10.7	1.2%
Palladium	683.3	4.3	0.6%
	Average PM		1.0%

 

SHFE Prices 06:30 GMT	RMB	Change	% Change
Cu	46210	780	1.7%
AL	12670	-85	-0.7%
Zn	21220	325	1.6%
Pb	17815	260	1.5%
Ni	86950	1190	1.4%
Sn	150370	3480	2.4%
Average change (base metals)	0		1.3%
Rebar	2926	15	0.5%
Au	270.1	-0.25	-0.1%
Ag	4091	-11	-0.3%

 

Economic Agenda
GMT	Country	Data	Actual	Expected	Previous
Jan-01	CNY	Manufacturing PMI	51.4	51.6	51.7
Jan-01	CNY	Non-Manufacturing PMI	54.5		54.7
Jan-02	Spain	Spanish Manufacturing PMI	55.3	54.6	54.5
Jan-02	Italy	Italian Manufacturing PMI	53.2	52.3	52.2
Jan-02	France	French Final Manufacturing PMI	53.5	53.5	53.5
Jan-02	Germany	German Final Manufacturing PMI	55.6	55.5	55.5
Jan-02	EU	Final Manufacturing PMI	54.9	54.9	54.9
Today
1:45am	China	Caixin Manufacturing PMI	51.9	50.9	50.9
All Day	Germany	German Prelim CPI m/m			0.10%
7:45am	France	French Prelim CPI m/m		0.5%	0.0%
8:55am	Germany	German Unemployment Change		-5K	-5K
9:30am	UK	Manufacturing PMI		53.3	53.4
2:45pm	US	Final Manufacturing PMI		54.2	54.2
3:00pm	US	ISM Manufacturing PMI		53.7	53.2
3:00pm	US	Construction Spending m/m		0.5%	0.5%
3:00pm	US	ISM Manufacturing Prices		55.6	54.5

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