The three-month nickel price on the London Metal Exchange reached its downward limit soon after the opening on Wednesday March 16, while the rest of metals were generally firmer, as were the base metals on the Shanghai Futures Exchange.
* China announces measures to boost the economy and support markets...
* ...as the spread of Covid-19 surges.
* Markets seem ready for Federal Reserve’s rate rise.
Base metals
The three-month nickel price on the LME appears to have reached limit down at $43,995 per tonne, compared with the evening evaluation on March 7 of $48,078 per tonne – this suggests prices have overshot the 5% daily limit, so we wait to see how the LME deals with that. With the April contract on the SHFE trading at 235,200 yuan ($36,889) per tonne this morning, it would suggest an international nickel price of around $32,785 per tonne. This suggests LME nickel prices may spend a few days jumping from one limit down to another. The rest of the base metals on the LME were split into two camps with copper ($10,011.50 per tonne) and aluminium ($3,336.50 per tonne) up by 1.2% and 1.1% respectively, while the rest were little changed.
The most-traded contracts on the SHFE were up across the board with gains averaging 2.1%, albeit somewhat skewed by April nickel being up by 7.1%. April copper was up by 0.9%, at 72,090 yuan per tonne.
Precious metals
Gold and silver were weaker this morning with spot gold prices off by 0.1% at $1,916.64 per oz and silver down by 0.6% at $24.78 per oz, while the platinum group metals were up by around 2%.
Wider markets
With risk-on appetite returning amid Chinese support, haven demand for United States 10-year treasuries has eased, allowing yields to climb to 2.18% ahead of today’s expected US Federal Reserve rate hike. The yield was 2.03% at a similar time on Monday.
Asia-Pacific equities were extremely strong on Wednesday in response to China's pledge to support markets: the Hang Seng (+9.08%), the Nikkei (+1.64%), the Kospi (+1.44%), the ASX 200 (+1.1%) and China’s CSI 300 (+4.32%).
Currencies
The US Dollar Index is somewhat weaker this morning, again probably signaling less haven demand. It was recently at 98.72, compared with 98.92 at Tuesday’s close.
The other major currencies were mainly firmer: the euro (1.0993), the Australian dollar (0.7230) and sterling (1.3060), while the Japanese yen (118.32) continues to weaken, again a sign that haven demand is weaker.
Key data
Economic data out already on Wednesday showed Japan’s revised industrial production fell by 0.8% month on month in January, after a 1.3% decline in December.
Later there is US data on retail sales, import prices, business inventories, housing market index and crude oil inventories.
In addition, the US Federal Reserve will announce its interest rate decision, provide economic projections, make a statement and hold a press conference.
Wednesday’s key themes and views
While the resumption of trading on nickel is all important and is in focus, China’s move to boost the economy and support markets is likely to be the main market moving development today that is likely to support metal prices further.
Haven demand is on a back footing and that is being reflected across the precious metals, with the likelihood of a US Federal Reserve rate rise also likely to be weighing on sentiment. Given the inflationary situation and uncertainty over where the Russian-Ukraine war is heading, we expect gold will find support before too long.