Base metals prices on both the London Metal Exchange and Shanghai Futures Exchange were mixed on the morning of Thursday March 17, with one noticeable feature being that volumes on the LME have been very light.
• LME extends daily limit on nickel to 8% for Thursday’s trading
• Market takes Federal Reserve’s 25 basis point rate rise in its stride
• Hope emerges for Russian-Ukraine peace talks, but who can trust Putin?
• European passenger vehicle registrations fall 6.7% in February as supply chain disruptions dominate
Base metals
The three-month base metals prices, with the exception of nickel that has yet to open this morning (it will open at 8am London time), were mixed with copper ($10,115.50 per tonne) and tin ($42,055 per tonne) both down by 0.2%, while aluminium ($3,298 per tonne) was up by 1%, with zinc ($3,813.50 per tonne) and lead ($2,264.50 per tonne) up by 0.4% and 0.6% respectively.
LME nickel, when it opens, will be allowed to trade in an 8% range, which will put the lower limit somewhere below the $42,000 per tonne area. By comparison with the April contract on the SHFE, which was trading at 220,560 yuan ($34,731) per tonne on Thursday morning, it would suggest an international nickel price of around $30,735 per tonne. This implies LME nickel will fall to limit down on Thursday and will continue to do so for a few more days, unless the LME broadens the daily limit.
The most-traded contracts on the SHFE were mixed on Thursday morning, with April nickel and May tin down by 1.2% and 0.6% respectively, while the rest of the metals were up by an average of 1.4%, buoyed by Wednesday’s announcements that Chinese authorities would take measures to boost the economy and support prices. April copper was up by 1%, at 72,390 yuan per tonne.
Precious metals
Gold, silver and palladium were up on Thursday morning. Gold was up by 0.4%, at $1.933.73 per oz; silver was up by 0.2%, at $25.19 per oz; and palladium was up by 2.5%, at $2,459 per oz; platinum was off by 0.1%, at $1,020.50 per oz.
Wider markets
With risk-on appetite returning and with the United States embarking on its interest rate rises, the yield on US 10-year treasuries has held up near recent highs and was recently at 2.16%, compared with 2.18% at a similar time on Wednesday.
Asia-Pacific equities were once again showing strong gains this morning for a second day running: the Hang Seng (+5.48%), the Nikkei (+3.46%), the Kospi (+1.33%), the ASX 200 (+1.05%) and China’s CSI 300 (+1.95%). All highlighting the return of risk-on.
Currencies
The US Dollar Index is somewhat weaker on Thursday morning, again probably signaling less haven demand and as the Fed settled on a 25-basis-point rise, rather than a 50-basis-point rise. The index was recently at 98.33, compared with 98.72 at a similar time on Wednesday.
The other major currencies were mainly stronger: the euro (1.1040), the Australian dollar (0.7313) and sterling (1.3177), while the Japanese yen (118.84) continues to weaken, again a sign that haven demand is weaker.
Key data
Thursday’s economic agenda is busy, starting with European Union consumer prices (CPI), followed by the Bank of England rate setting announcement and monetary policy statement.
Later there is US data on the Philly Fed manufacturing index, initial jobless claims, housing starts, building permits, industrial production, capacity utilization rate and natural gas storage.
In addition, European central bank president Christine Lagarde is scheduled to speak this morning.
Thursday’s key themes and views
The weakness seen across base metals since early last week seems to have run its course, with most of the metals, with the exception of nickel, finding support in recent days and generally getting some lift. China’s move to boost the economy and support markets is likely to remove one of the headwinds the market was experiencing in recent quarters – it could now mean more synchronized growth across China, US and EU, depending on how much of a drag high energy prices become.
In Wednesday’s report, we expected gold to find support before too long - this seems to have happened now. While haven demand is on a back footing for now, the inflationary situation and uncertainty over where the Russian-Ukraine war is heading remain supportive issues.