Uncertainty about how the lifting of lockdowns will pan out, with some clusters of Covid-19 infections being seen in countries where lockdowns have been lifted, is unsettling markets this morning, Wednesday May 13.
As such, base metals prices along with equity markets have started to pull-back, or at least their rebounds are on hold.
* Business loans for long-term investments drop by 15% in Europe in the first quarter, while loans for working capital jump by 26%.
* Asian-Pacific and pre-market major western equity indices were mainly weaker this morning, with Germany’s Dax futures indicated to be down by 1.4%
* Given the Covid-19 pandemic, the last thing the global economy needs is a flare-up in United States-China trade tension.
Base metals
Three-month base metals prices on the London Metal Exchange were down across the board this morning by an average of 0.3%, with the pullbacks ranged from 0.1% for nickel ($12,275 per tonne) and 0.5% for lead ($16,23 per tonne). Copper was down by 0.3% at $5,214.50 per tonne.
Volumes have been average with 6,168 lots traded as of 6.17am London time, this compared with some 4,500 lots traded at a similar time on Tuesday morning.
The most-traded base metals contracts on the Shanghai Futures Exchange were also all in negative territory this morning and were down by an average of 0.9%, led by a 1.9% drop in June lead, with July zinc off by 1.6% and June copper down by 0.9% at 42,900 yuan ($6,051) per tonne. The rest were off between 0.2% and 0.5%.
Precious metals
Spot gold prices were little changed this morning at $1,704.18 per ozs, compared with $1,703.95 per oz at Tuesday’s close.
All the precious metals are wedged into tightening consolidation patterns, suggesting breakouts are not too far away.
Wider markets
In line with the more-risk-off feel to the market, the yield on benchmark US 10-year treasuries has eased; it was recently quoted at 0.67% this morning, compared with 0.69% at a similar time on Tuesday morning and a range of between 0.61% and 0.71% last week.
Asian-Pacific equities were mixed this morning: the Nikkei (-0.24%), China’s CSI 300 (-0.14%), the ASX 200 (-0.01%), the Kospi (+0.5%) and the Hang Seng (+0.13%). But considering the Dow Jones Industrial Average closed down by 1.89% at 23,764.78 on Tuesday, markets in the region have held up relatively well.
Currencies
The US dollar index is consolidating recent gains, it was recently quoted at 99.93, the range since the start of April being 98.54-100.87.
The other major currencies we follow were consolidating this morning: the euro (1.0856), sterling (1.2293), the Australian dollar (0.6484) and the yen (107.12).
Key data
There is a host of data out on Wednesday, especially for the United Kingdom with key data there including preliminary gross domestic product, manufacturing and industrial output, construction output and index of services - see table below for more details.
Elsewhere, there is data on the European Union’s industrial production as well as the US’ producer price index and crude oil inventories.
In addition, US Federal Reserve Chairman Jerome Powell is speaking.
Today’s key themes and views
The base metals are consolidating, this after many of them have put in strong rebounds since the March lows. The main metals that have struggled the most on the upside in recent weeks are aluminium and lead.
With the broader markets looking less robust and with some concerns that trade talks between the US and China could get acrimonious again, and while we wait to see how the spread of the virus is contained as lockdowns are eased, all suggests would-be consumers may feel in no hurry to chase prices higher.
Gold prices are trading in a tight range so seem to be waiting for the next move. With risk-off easing in recent days and in this climate full of uncertainty, we still favor the upside in gold and investors’ interest in it may well pick up if they become more concerned about the sustainability of equity rebounds.
William AdamsFastmarkets