MORNING VIEW: Base metals prices mostly bullish, as are broader markets

With the exception of tin, base metals prices on both the London Metal Exchange and the Shanghai Futures Exchange were firmer this morning, Friday February 5, suggesting there is little appetite for follow-through selling after recent bouts of weakness.

  • Asian-Pacific equities were stronger this morning…
  • …as was the US Dollar Index


Base metals

Three-month tin prices were down by 0.4% at $22,880 per tonne this morning on the LME, this after reaching a multi-year high at $23,435 per tonne on Tuesday. The rest of the base metals were up by an average of 0.7%, with nickel leading the way with a 1.7% rise to $17,915 per tonne. Copper was up by 0.6% at $7,864 per tonne.

The most-traded base metals contracts on the SHFE were for the most part stronger, the exception being March tin that was down 0.2%. The rest were up by an average of 1.8%, led by a 2.4% rise in April nickel, while March copper was up by 1% at 58,230 yuan ($9,005) per tonne.

Precious metals
Precious metals were up across the board by an average of 0.7%, but this was after a heavy down day for gold and silver on Thursday that saw the two metals fall either side of 2%.

Gold was up by 0.2% at $1,799.18 per oz this morning, after yesterday’s low of $1,785.50 per oz, and silver was up by 0.5% at $26.46 per oz, after yesterday’s low of $25.91 per oz. Platinum was up by 1.5% at $1,113 per oz and palladium was up by 0.7% at $2,309 per oz.

Wider markets
The yield on US 10-year treasuries has consolidated after its recent rise, it was recently quoted at 1.13%, down from 1.14% at a similar time on Thursday.

Asian-Pacific equities were stronger this morning: the Hang Seng (+0.7%), the CSI (+0.17%), the Kospi (+1.07%), the ASX 200 (+1.11%) and the Nikkei (+1.54%).

Currencies
The US Dollar Index pushed higher on Thursday and was firm this morning; it was recently at 91.54, having in recent days pushed up through previous highs between 90.97 and 91.06.

Most of the other major currencies were weaker: the euro (1.1962), the yen (105.51) and the Australian dollar (0.7603), while sterling (1.3678) was stronger.

Key data
Friday’s economic agenda is busy with data already out showing Japan’s leading indicators fell to 94.9% in December, after a reading of 96.4% in November, and German factory orders fell by 1.9% month on month in December, after a 2.7% gain in November.

Data out later includes French preliminary private payrolls and trade balance, UK house price index, Italian retail sales and from the United States there is the monthly employment report and data on the trade balance and consumer credit.

In addition, the Bank of England’s Governor Andrew Bailey is scheduled to speak twice.

Today’s key themes and views
The base metals are still for the most part in sideways-to-lower consolidation trading ranges, but what weakness has been seen in recent weeks has not picked up downward momentum, suggesting there is little appetite to reduce exposure on a large scale.

So for now it looks like the underlying uptrends are paused, with the market expecting better demand to come through while physical demand recovers as the year progresses. Needless to say, holding up in high ground comes with its dangers.

The sell-off in gold and silver has led to a relatively low gold price, while it meant silver prices returned to the levels they were at before their recent spike higher. This can be seen by the gold/silver ratio being at 1:68, compared with around 1:72 before silver spiked higher. Palladium has been steadily recovering all week and platinum prices have rebounded back into the middle of their recent range. At yesterday’s low, gold was the lowest it has been since late-November, with prices now in the middle of its broad down channel that is ranges between $1,695 and $1,865 per oz.


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