METALS MORNING VIEW 01/04: Better Chinese PMI data gives base metals prices a boost

Better Chinese manufacturing data has surprised the market and boosted three-month base metals prices on the London Metal Exchange by an average of 1% this morning, Monday April 1.

Nickel led the way with a 2.2% gain to $13,285 per tonne, up from Friday's close at $12,995 per tonne, while tin was the laggard with a 0.4% gain. Aluminium, zinc and lead were all up by 0.9%, while copper was up by 0.7% at $6,521 per tonne, up from Friday's close of $6,473.50 per tonne.

Volume was above average with 9,614 lots traded on LME Select as at 7.48 am London time. This compares with the 5,448 lots traded at a similar time on Friday.

Spot precious metals prices have been mixed this morning; gold, silver and palladium prices were either side of unchanged with gold at $1,290.34 per oz, while platinum was up by 0.7% at $850.90 per oz, after a close on Friday of $845 per oz.

In China, base metals prices on the Shanghai Futures Exchange were up by an average 1.5%, with gains ranged between 0.5% for May tin and 2.5% for May nickel. May copper was up by 1.6% and was recently quoted at 49,420 yuan ($7,362) per tonne, compared with 48,640 yuan per tonne at the close on Friday.

In other metals in China, the May iron ore contract on the Dalian Commodity Exchange was stronger, up by 3.3% at 641.50 yuan per tonne from 621 yuan per tonne at the close on Friday. On the SHFE, the May steel rebar contract was up by 1.9% at 3,798 yuan per tonne compared with 3,727 yuan per tonne at Friday's close.

In wider markets, the spot Brent crude oil price was firmer by 0.81% at $68.12 per barrel from $67.57 per barrel at the close on Friday.

The yield on US 10-year treasuries was recently quoted at 2.4433% from 2.4059% at a similar time on Friday. The yields on the US 2-year and 5-year treasuries remain inverted - they were recently quoted at 2.3014% and 2.2755% respectively. The German 10-year bund yield was recently quoted at minus 0.0392% after minus 0.0600% at a similar time on Friday morning.

Asian equity markets were stronger on Monday following better Chinese purchasing managers' index (PMI) data: the Nikkei (+1.43%), the CSI 300 (+2.62%), the Hang Seng (+1.65%), the Kospi (+1.29%) and the ASX 200 (+0.59%).

This follows a stronger performance in western markets on Friday: in the United States, the Dow Jones Industrial Average closed up by 0.82% at 25,928.68, and in Europe, the Euro Stoxx 50 was up by 0.95% at 3,351.71.

The dollar index has maintained its buoyancy and was recently at 97.16 while it consolidates recent gains, it was quoted at 97.25 at a similar time on Friday. The consolidation in the dollar has helped the other major currencies find support: the euro (1.1231), the Japanese yen (111.09), sterling (1.3059) and the Australian dollar is firmer at 0.7126.

The yuan, having been range bound of late started to weaken at the end of last week, but the better PMI data has since strengthened it, it was recent quoted at 6.7083, compared with Thursday's low of 6.6793. The other emerging market currencies we follow are consolidating after recent weakness.

On Sunday, China released manufacturing PMI data that came in at 50.5 for March, up from a previous reading of 49.2, while the country's non-manufacturing PMI stood at 54.8, having previously been at 54.3. Both readings are above 50, indicating industry expansion.

The strong data has continued this morning with Japan's manufacturing PMI rebounding to 49.2 from 48.9, China's Caixin manufacturing PMI rising to 50.8 from 49.9 and Spain's manufacturing PMI climbing to 50.9 from 49.9 previously.

Later on Monday, there is further manufacturing PMI data out across Europe and the US. In addition, there is data on Italian and European Union employment, EU consumer prices, US retail sales, US business inventories and US construction spending.

The base metals are for the most part looking stronger, but they are split into two camps with zinc and copper leading on the upside, while aluminium, tin, lead and nickel are getting some lift off recent lows. The Chinese data is encouraging, but it may be dampened if EU and US data disappoints. That said, what markets are still waiting for is a US-China trade deal and how the next set of talks go is likely to set the direction.

The heat had come out of the August 2018-to mid-February gold rally and prices are consolidating. A pick-up in China's economy could reduce the need for haven assets. That said, the key to where the global economy heads next is likely to be determined by US-China trade. Palladium prices are undergoing a profit-taking sell-off, while platinum is following gold's lead.

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