MORNING VIEW: Base metals mixed across exchanges, but mostly standing still

Base metals prices on the LME and SHFE were mixed on the morning of Friday September 17, with most remaining listless despite being buffeted by a firmer US dollar, generally weaker economic data and disruption to both production and supply.

  • Broader markets were quiet but firmer heading into the weekend and China’s Mid-Autumn Festival holiday takes place on Monday and Tuesday

Base metals
Three-month base metals prices on the London Metal Exchange rose by an average of 0.4% on Friday morning. Aluminium was slightly down, by 0.1%, at $2,886.50 per tonne and tin was little changed at $34,200 per tonne, while the rest were up by an average of 0.7%, led by a 1% rise by copper that was recently at $9,422 per tonne. The firmer tone on the LME followed a weaker performance on Thursday when prices were down by an average of 1.1% – so, overall, the markets remain range bound.

The most-active base metals contracts on the Shanghai Futures Exchange were mixed and polarized on Friday, with October copper down 0.9% to 69,610 yuan ($10,787) per tonne and nickel down by 1,5%. October contracts for zinc and tin were both up by 1% and lead was up 0.4%, but aluminium was largely unchanged.

Precious metals
Precious metals were mixed too, with spot palladium down by 0.7% at $2,009.80 per oz, while the other precious metals were up by an average of 0.7%, with spot gold up by 0.4% at $1,760.61 per oz.

Wider markets
The yield on United States 10-year treasuries has climbed once again and was recently at 1.33%, up from 1.28% on Wednesday.

Asia-Pacific equities were mainly firmer this morning: the Nikkei (+0.54%), the Hang Seng (+0.59%), the CSI 300 (+0.41%) and the Kospi (+0.16%) were all in positive territory, while the ASX 200 (-0.74%) was weaker.

Currencies
The US Dollar Index was consolidating this morning and was recently at 92.85, this after a stronger performance on Thursday when the index rallied from around 92.45.

With the dollar stronger, the other major currencies were on the back foot: sterling (1.3804), the euro (1.1768), the Japanese yen (109.87) and the Australian dollar (0.7302).

Key data
Friday’s economic agenda contains data on United Kingdom retail sales and consumer inflation expectations; European data on the current account and consumer prices; and US data on the University of Michigan consumer sentiment and inflation expectations.

Friday’s key themes and views

Trading in the base metals appears to be getting more choppy. Overall, though, most metals remain rangebound, with even aluminium – the one metal that has been forging ahead in recent weeks – starting to consolidate this week. Recent strength in zinc and nickel has also faded, while lead has been looking the weakest.

Overall, we remain bullish for the longer term, but when upward momentum wanes there is always an increased risk of a profit-taking sell-off. Generally, in recent months, pullbacks have tended to attract dip buying, however, and we expect more of the same.

Gold prices broke out of their recent range on Thursday, breaching support at around $1,783 per oz, with support now around the $1,746 per oz area. Firmness in the dollar and US treasury yields, in a quiet market, seems to have triggered some weakness, with silver looking even weaker and setting fresh lows for the year.


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