Base metals prices on the LME and SHFE were down across the board on Monday April 25, amid continuing concerns over slower growth in China, because of Covid-19 lockdowns, and due to rising interest rates, inflation and energy costs everywhere else.
* China’s renminbi yuan continues to slide to 6.5475, after trading either side of 6.3400 through the first quarter
* China’s mass Covid-19 lockdowns have spread, with Beijing now in the spotlight
Base metals
Three-month base metals prices on the London Metal Exchange were weaker on Monday morning, with prices down by an average of 1.3%, led by a 2% fall in aluminium to $3,180 per tonne. Copper was down by 0.7% at $9,997.50 per tonne. The rise in traded volumes is also an indication that the selling is broad based.
Traded volumes on the LME had reached 7,477 lots by 6.24am London time on Monday, compared with 1,960 lots at a similar time on Friday.
The most-traded contracts on the Shanghai Futures Exchange were weaker and down by an average of 2.9%, led by a 6.3% decline in May nickel, with June aluminium down by 4.6% and June copper down by 1.5% at 73,710 yuan ($11,251 per tonne).
Precious metals
Despite weakness across the other markets, the precious metals have also been on the back foot, with the complex off by an average of 1.3% on Monday morning. Palladium led the way with a 3% fall to $2,302.50 per oz, while platinum bucked the trend with a 0.3% rise to $928.50 per oz. Gold was down 0.8% to $1,916.45 per oz and silver was down 1.5% at $23.74 per oz.
Wider markets
United States 10-year treasuries yields have pulled back from last week's highs, which may well be a sign of a pick-up in haven demand. They were recently at 2.86%, compared with 2.93% at a similar time on Friday.
Asia-Pacific equities were also weaker on Monday morning: the Nikkei (-1.86%), the ASX 200 (-1.57%), the Kospi (-1.67%), the CSI 300 (-3.42%) and the Hang Seng (-3.44%).
Currencies
The US Dollar Index continues to race higher and was recently at 101.59, compared with 100.50 at a similar time on Friday.
The strength in the dollar continues to weigh on the other major currencies: the euro (1.0725), the Japanese yen (128.41), sterling (1.2755) and the Australian dollar (0.7157).
Key data
Key economic data already out on Monday showed Japan’s services producer prices climbed 1.3% in March, after a 1.1% rise in February.
Later, there is data on Germany’s Ifo business climate and United Kingdom industrial order expectations from the Confederation of British Industry.
Monday’s key themes and views
Base metals have been under pressure in recent days, but that picked up momentum on Friday and there has been follow-through selling on Monday morning, led by the drops in aluminium and tin, that have broken through support levels. We said in recent days that “given the slowdown in China and global economic headwinds, the metals have an excuse to head lower, but will they? Or will dip-buying continue to underpin them? In the short term, there may well be room for prices to test lower, or at least struggle to rise.” That sell-off is now under way, so we will now have to wait and see how far it runs. Given what is unfolding in China, plus nervousness in equities - especially the tech sector - this latest correction may run for a while, but we do see it as a correction rather than a trend change.
The broad-based weakness is dragging gold prices lower, which is a sign of general liquidation. As is often the case, gold’s initial reaction can be counter what you would expect a haven asset to do, as investors look to raise cash for margin calls, while the secondary reaction is in line with how you would expect a haven asset to trade.