MORNING VIEW: LME metals mixed after Friday’s employment data rebound falters

Base metals prices on the London Metal Exchange were mainly lower this morning, Monday June 7, after the rally sparked by Friday’s worse-than-expected US employment report ran out of steam.

  • China’s imports climbed 51% and exports were up 28% year on year in May.
  • The US Dollar Index weakened after Friday’s disappointing employment report in the United States.

Base metals
LME three-month base metals prices were mostly weaker this morning, with the exception of lead ($2,136.50 per tonne), which was up by $1 per tonne. The rest were down by an average of 0.5%, with copper off 0.5% at $9,911 per tonne. This follows an average rise of 0.9% across the base metals complex on Friday.

Volumes traded on the LME have been relatively light with 3,366 lots traded as of 6.08am London time, compared with around an average of 6,817 at a similar time across last week.

The most-active Shanghai Futures Exchange base metals contracts were more up than down, with July nickel and July lead down by 0.2% and 0.9% respectively, while the rest of the complex was up by an average of 0.7%. July copper was up by 0.5% at 71,500 yuan ($11,168) per tonne.

Precious metals
Spot precious metals were mixed with gold ($1,885.96 per oz) and silver ($27.58 per oz) down by 0.3% and 0.8% respectively – after gains averaging 1.1% on Friday – while platinum ($1,168 per oz) and palladium ($2,846.10 per oz) were both up 0.3% this morning.

Wider markets
The yield on US 10-year treasuries has slipped back to 1.57%, having been at 1.62% at a similar time on Friday. The fact the US employment report did not rock the boat has left the yield rangebound.

Asia Pacific equities were mixed on Monday: the Nikkei (+0.27%), the Kospi (+0.35%), the Hang Seng (-0.63%), the ASX 200 (-0.18%) and the CSI 300 (-0.39%).

Currencies
The US Dollar Index turned higher in anticipation of last Friday’s jobs data, reaching 90.63 on Friday, before falling after the data was released – it was recently at 90.20. The recent low was 89.53 on May 25.

With the dollar weaker, the other major currencies were holding above last week’s lows this morning: sterling (1.4124), the Australian dollar (0.7732), the yen (109.50) and the euro (1.2156).

Key data
In addition to China’s trade data, as mentioned above, other data already out showed Japan’s leading indicators climb to 103% in April, from 102.5% in March.

Later today there will be data on German factory orders, United Kingdom house prices, EU Sentix investor confidence and US consumer credit.

Today’s key themes and views

The base metals have lost upward momentum and are oscillating sideways as they consolidate. We will now have to see whether this consolidation is just another pause in the uptrend or a sign that the rallies have run their course. And with some US central bankers starting to entertain talk about tapering, the markets may well get more nervous, which will increase the risk of corrections, even if the underlying fundamentals for the metals remain bullish – given the supply disruptions, shipping issues, economic recoveries and infrastructure spending.

While the background for gold is looking increasingly bullish, due to the inflationary pressures and the potential for a broad-based correction, trading is also likely to be nervous in case that potential correction prompts a dash for cash.

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