Three-month base metals prices on the London Metal Exchange were for the most part stronger on the morning of Tuesday May 29, with gains averaging 0.8%, except aluminium where prices are off 0.1%, while copper prices are up 0.3% at 46,879 per tonne.
Volume on the LME has been high, with 10,305 lots traded as of 6:59am London time.
This follows a general day of weakness on Friday, when all the metals – except zinc – were lower by an average of 1%, while zinc prices were up 0.5%.
Gold and silver prices were down either side of 0.2%, with spot gold prices at $1,298.08 per oz, while platinum and palladium prices were up 0.9% and 0.5%, respectively.
The metals in China were generally firmer this morning, led by a 3.2% gain in tin prices. Nickel, lead and zinc prices are also up strongly with gains of 2.2%, 1.8% and 1.4%, respectively, with copper up 0.4% at 51,670 yuan ($8,059) per tonne, while aluminium bucks the trend with a 0.3% drop.
Spot copper prices in Changjiang were up 0.3% at 51,220-51,500 yuan per tonne and the LME/Shanghai copper arbitrage ratio is firmer at 7.51.
In other metals in China, iron ore prices were up 1.4% at 460.50 yuan per tonne on the Dalian Commodity Exchange. On the SHFE, steel rebar prices were up 0.9%, while gold prices are off 0.1% and silver prices were down 0.1%.
In wider markets, spot Brent crude oil prices were down 0.58% at $75.56 per barrel this morning, now considerably down from their peak of $80.49 a barrel on May 22, and are lower on reports that oil companies would boost production to offset any drop from Iran and Venezuela. The yield on US 10-year treasuries has fallen further to 2.8908% and the German 10-year bund yield has dropped to 0.31%, with yields falling as safe-haven buying picks up on concerns over Italy’s political uncertainty.
Equity markets in Asia were for the most part weaker on Tuesday: Nikkei (-0.59%), Hang Seng (-0.65%), CSI 300 (-0.51%) and Kospi (-0.83%), while the ASX 200 is up 0.13%. This follows a weaker performance in western markets on Monday, where in Europe the Euro Stoxx 50 closed down 0.93% at 3,482.64.
The dollar index, at 94.46, is climbing again despite the weaker US treasury yields, which suggests it is picking up safe-haven buying. The index has now pushed up through the first of its resistance levels at 94.22, the next being 95.15.
Most of the other major currencies are weaker on the back of the stronger dollar: euro (1.1602), sterling (1.3293) and the Australian dollar (0.7531), but the yen is climbing (108.89), which again suggests safe-haven buying.
The yuan has weakened further – it was recently quoted at 6.4141 – but most of the emerging market currencies we follow are only slightly weaker, with the weaker US treasury yields no doubt a positive factor in an overall risk-off environment.
Today’s economic agenda includes data on Japan’s unemployment rate, which was unchanged at 2.5%, later there is data out on European Union M3 money supply and private loans, with US data including house prices and consumer confidence.
After leading on the downside in recent weeks, tin prices are rebounding, as are zinc prices, while nickel prices continue to edge higher. Lead prices are also rebounding after Friday’s correction, while aluminium and copper prices are moving sideways. Bond yields and the dollar point to risk-off sentiment that is hitting equities, but so far the base metals are not being dragged down, but this may be because they have not been particularly buoyant in recent months. We still feel the global economy is expanding, which is underpinning demand growth for metals, which in turn should keep prices underpinned too, but we may have to wait for signs of stronger economic growth and less trade tension, before the market gets more bullish again.
Gold prices ran up last week on news that the summit between the US and North Korea was cancelled and prices are now consolidating. Interestingly, the weaker treasury yields and pick-up in safe-haven demand in the dollar and yen, are not lifting gold prices as well.
This article was first published by FastMarkets as the Metals Morning View.
William Adams
FastMarkets