Base metals prices on the Shanghai Futures Exchange were up across the board while those on the London Metal Exchange were mixed during the morning of Friday May 28. This followed surging prices on Thursday.
* Falling initial jobless claims in the United States boosted sentiment
* An indefinite strike has started at BHP’s Santiago copper-mining operations center
* Asia-Pacific equities upbeat as are pre-market major Western equity index futures
Base metals
LME three-month base metals prices were split, but the gains outweighed the losses. Copper and aluminium were both down by 0.2% at $10,277 per tonne and $2,482 per tonnes respectively. The rest were up by an average of 0.8%, with lead ($2,211 per tonne) being the laggard and tin ($30,745 per tonne), the outperformer.
Friday’s early movements came after a bullish run on Thursday when the LME complex closed higher by an average of 2.6%.
The most-active Shanghai Futures Exchange base metals contracts were up across the board in response to the LME’s performance on Thursday. Prices were up by an average of 3.2%, led by a 5.3% rise in July nickel and a 5% rise in July tin. July copper, at 73,630 yuan ($11,559) per tonne, was up by 2.6%.
Precious metals
Spot precious metals were mixed, with gold ($1,892.15 per oz) and silver ($27.68 per oz) weaker by 0.2% and 0.6% respectively, while platinum ($1,180 per oz) and palladium ($2,820.50 per oz) gained 0.2% and 0.5% respectively.
Wider markets
The yield on US 10-year treasuries has bounced up and was recently quoted at 1.62%, up from 1.57% at a similar time on Thursday - this is a sure sign that risk-on has returned, at least for now.
Asia-Pacific equities were stronger across the board on Friday: the Nikkei (+2.17%), the Hang Seng (+0.53%), the ASX 200 (+1.24%), the CSI 300 (+0.2%) and the Kospi (+1.01%).
Currencies
The US Dollar Index rebounded on Wednesday, paused on Thursday and was edging higher on Friday morning. It was recently at 90.12, this after Tuesday’s multi-month low of 89.53.
With the dollar firmer, most of the other major currencies were slightly weaker this morning: sterling (1.4184), the Australian dollar (0.7730), the yen (109.91) and the euro (1.2180).
Key data
Friday’s economic agenda is busy. Data already out showed that Tokyo’s core consumer price index (CPI) had fallen by 0.2% in May, the same as what was seen in April. Japan’s unemployment rate edged up to 2.8% in April, from 2.6% in March.
Later there is data on German import prices, French consumer spending, French CPI and gross domestic product.
US data includes personal income, spending and personal consumption expenditures CPI, goods trade balance, wholesale inventories, Chicago purchasing managers’ index and consumer sentiment and inflation expectations from the University of Michigan.
In addition, there is a Group of Seven meeting.
Today’s key themes and views
The triggers for the surge in metal prices seem to be numerous, including continued healthy US employment data, reports that US President Joe Biden plans to make a $6-trillion budget announcement and the strike at BHP. The surge in prices once again suggests that the price weakness over the past few weeks was just another bout of consolidation in the mega-uptrend. In turn, this supports the view that a super-cycle is under way, but the road ahead is likely to get bumpy, especially if China continues to suppress commodity price inflation and the US Federal Reserve starts to share its taper plans.
With equities and other commodities on the rise as risk-on returns, it is not surprising that gold prices have pulled back a bit, but given the inflationary implications of the bullishness on other commodities, this rising tide is likely to carry gold with it.