Base metals prices on the LME were mainly weaker on the morning of Monday May 24, while those on the SHFE were down across the board in response to attempts by the Chinese authorities to inhibit price increases.
* Power shortages in China, brought on by drought and emissions controls, are forcing some metal producers to reduce output.
* Proposed infrastructure plans in the United States face having to be cut in an attempt to gain Republican Party support.
Base metals
London Metal Exchange three-month base metals prices were mainly weaker this morning, with the exception of nickel, which was up 0.1% at $16,750 per tonne. The rest of the base metals complex was down by an average of 1.2%, led by a 2.3% fall in aluminium to $2,325.50 per tonne, while copper was down the least with a 0.7% fall to $9,828 per tonne.
Volumes have been high, however, with 13,606 lots traded by 6.24am London time, when a more normal volume for a similar time of day has recently been around 8,000 lots.
The most-active Shanghai Futures Exchange base metals contracts were down by an average of 1.7%, led by a 3% fall in July aluminium. July nickel was down by 2%, with the other base metals down by around 1.3%. July copper was down 1.3% at 71,660 yuan ($11,135) per tonne.
Precious metals
Precious metals were up across the board on Monday morning, led by a 1.3% rise in palladium to $2,808.40 per oz, with platinum up by 0.5% at $1,173.60 per oz, silver up 0.6% to $27.69 per oz and gold up by 0.2% at $1,885.35 per oz.
Wider markets
The yield on US 10-year treasuries was recently quoted at 1.62%, down from 1.63% on Friday.
Asia-Pacific equities were mainly mixed on Monday: the ASX 200 (+0.16%), the Nikkei (+0.25%) and the CSI 300 (+0.13%) all increased, while the Hang Seng (-0.38%) and the Kospi (-0.45%) were weaker.
Currencies
The US Dollar Index extended lower on Friday to set a multi-month low of 89.65 and is currently consolidating in low ground at around 89.97 this morning.
With the dollar consolidating in low ground, most of the other major currencies were consolidating in high ground: the euro (1.2188), sterling (1.4151) and the Australian dollar (0.7735) up, while the yen (108.79) was also stronger, but has been weaker than the others in recent months.
Key data
Monday’s economic data is light with leading indicators from China.
But, there are numerous central bankers scheduled to speak including Bank of Japan governor Haruhiko Kuroda, Bank of England governor Andrew Bailey and Federal Open Market Committee members Lael Brainard and Raphael Bostic.
Today’s key themes and views
A correction is under way and the trigger seems to be China's attempts to slow down its economy and put pressure on the metal industry to keep prices in check. Unfortunately, the fact it is having to rein in some producers due to power shortages will not be helping. Given the path of least resistance has been to the upside, while China’s attempts to lower prices may be effective, it may be fighting against the tide, so the pullback could be short lived. The metals have had a very strong run over the past year so some meaningful pullback would not be surprising, but we remain long-term bullish.
Gold prices are rallying and the background seems to justify that, given that there is a lot of stress in the system with overbought asset prices, inflationary fears and concern that the US Federal Reserve may be falling behind the curve. In addition, with Bitcoin correcting, gold has less competition.