Base metals prices on the London Metal Exchange and Shanghai Futures Exchange were mixed on the morning of Thursday March 31, with a slowdown in Chinese manufacturing likely to weigh on overall sentiment.
• China’s purchasing managers indices (PMI) for manufacturing and non-manufacturing dropped into contraction mode in March.
• This raises the prospects of stagflation, but the silver lining is it may spur China into providing more stimulus.
Base metals
Three-month base metals prices on the LME were mainly weaker, with tin the only metal showing gains this morning - up 0.4% at $42,690 per tonne. The rest - with the exception of nickel, which has yet to open - were all weaker, with copper down 0.5% at $10,315.50 per tonne, zinc down 0.5% at $4,162 per tonne, aluminium down 0.8% to $3,522 per tonne and lead down 0.8% at $2,409.50 per tonne.
The most-traded May contracts on the SHFE were split, with nickel down 1.2%, tin down 0.9% and copper down 0.4% at 73,340 yuan ($11,553) per tonne. while aluminium was unchanged, zinc was up by 1% and lead up by 1.2%.
Precious metals
Precious metals were mainly weaker, with gold, silver and platinum off by an average of 0.6%, with gold down by 0.4% at $1,924.30 per oz, while palladium was up by 0.2% at $2,273.50 per oz.
Wider markets
United States 10-year treasuries yields were weaker on Thursday morning and were recently at 2.34%, after reaching a high of 2.56% on Monday.
Asia-Pacific equities were mainly weaker in the morning: the Hang Seng (-1.12%), the Nikkei (-0.73%), the ASX 200 (-0.2%) and China’s CSI 300 (-0.75%), while the Kospi (+0.4%) bucked the trend.
Currencies
The US Dollar Index was turned back by resistance on Tuesday and has fallen to 97.87 as of Thursday, from Monday’s high at 99.37. The dollar is looking a bit toppy now, with the index testing support around 97.70.
With the dollar weaker, the other major currencies were stronger to flat, with the euro (1.1165) and the Japanese yen (121.79) stronger, while sterling (1.3133) and the Australian dollar (0.7484) were flat.
Key data
The economic agenda is busy today. China’s manufacturing PMI dropped to 49.5 in March, from 50.2 in February, with non-manufacturing PMI falling to 48.4 in March, from 51.6 in February. Japan’s preliminary industrial production was up by 0.1% in February, after a 0.8% decline in January, with the country’s housing starts rising 6.3% in February, after a 2.1% risen in January. German retail sales were up by 0.3% in February, after a 1.4% rise in January and the United Kingdom's gross domestic product (GDP) climbed 1.3% in the fourth quarter of 2021, after a 1.1% rise in the previous quarter.
US Federal Open Market Committee member John Williams is also scheduled to speak.
Thursday’s key themes and views
The base metals are generally holding up well and dips are being well supported, but there is a risk that the combination of China’s latest Covid-19 lockdowns, its weak economic data and concerns about high global energy prices, will weigh on sentiment. That said, China may well respond with more stimulus packages and that would be likely prompt a bullish reaction.
Gold prices have become quite volatile but are generally holding up well if you ignore the early-March spike higher. Bond market weakness and inflation are likely to provide support, but if there is any movement toward a settlement in the war in Ukraine then gold prices would be likely to head lower.