Metals consolidate in quiet trading, strong Chinese auto sales bode well

Base metals continue to consolidate for the most part, the exception seems to be nickel that is continuing its rebound, it closed up 0.6 percent at $10,290 yesterday, copper was up 0.3 percent at $4,664.50, zinc was off 0.3 percent at $2,313, while the rest were little changed. The precious metals are off between 0.1 percent for palladium ($684) and 0.8 percent for silver ($19.62), gold prices closed down 0.5 percent at $1,338.05.

This morning the metals are generally slightly weaker, copper, aluminium, nickel and lead are down between 0.1 and 0.4 percent with copper at $4,662, while zinc and tin are up 0.1 percent, volume remains light at 3,381 lots. There does not appear to be any spring back in activity post-summer, but it is still early days.

Precious metals are mixed, palladium is up 0.4 percent at $686.50, platinum is up 0.1 percent at $1,083.50, while gold and silver are little changed with gold prices last at $1,337.70.

In Shanghai, lead is off 0.2 percent, but the rest are firmer, tin is little changed, copper is up 0.1 percent at Rmb 36,680, the rest are up between 0.3 and 0.4 percent. Spot copper in Changjiang is up 0.1 percent at Rmb 36,680-36,800, the backwardation with the November date is at an equivalent of $18 per tonne and the LME/Shanghai copper arb ratio is at 7.87, which means it should be open for some trading.

In other metals in China, iron ore prices are little changed, steel rebar is off 0.2 percent, silver is down 0.8 percent and gold prices are off 0.3 percent. In international markets Brent crude is strong at $49.34.

Equities were weaker yesterday the Euro Stoxx 50 and Dow closed down by 0.3 percent – this morning Asia is mixed, the Hang Seng is up 1.3 percent, but that is more about structural changes in China that allows more insurers to trade in HK, the Nikkei is up 0.1 percent, the CSI 300 is off 0.2 percent and ASX200 is off 0.9 percent and the Kospi is down 1.3 percent.

In FX, the dollar index is yo-yoing either side of 95, dips seem to be supported, the euro is strengthening, probably as the ECB did not increase is quantitative easing, sterling is flat at 1.3320, as is the yen at 102.14 and the aussie is drifting, last at 0.7642. The yuan is weaker again, last at 6.6909 and the other emerging market currencies we follow are unchanged to slightly weaker.

Economic data out so far includes Chinese CPI and PPI, CPI fell to 1.3 percent in August – the fifth month-on-month fall that has seen it drop from 2.3 percent. In July it was 1.8 percent. PPI was  minus 0.8 percent, this was the eighth month of improvement, back in September to December last year it was falling at a rate of 5.9 percent. Japan’s tertiary industrial activity climbed 0.3 percent and Germany’s trade surplus dropped to 19.4 billion euro from 21.4 billion. Data out later includes French industrial production, UK goods trade balance, construction output and consumer inflation expectations, there is a Eurogroup meeting and US wholesale inventories. FOMC member Eric Rosengren is also speaking – see table below for more details.

The base metals are in three camps, tin and nickel are climbing, copper and aluminium are consolidating having seen their recent weakness halted, while lead and zinc, the two former front-runners, are pulling back as they consolidate. Volumes are low.  With such variety it does seem as though each metal is trading its own fundamentals for now and they are waiting for fresh developments. We have generally not been as gloomy as market sentiment has been and further strong Chinese passenger vehicle sales numbers, that showed a 24.5 percent rise in August, bodes well for the metal demand.

The run up in precious metals a week ago on the back of the US employment report saw prices challenge resistance levels, but selling has been encountered and prices are drifting lower again as they look for support. We expect dip to remain well supported and remain bullish overall.

 

Overnight Performance
BST	06:52	+/-	+/- %	Lots
Cu	4662	-3	-0.1%	1473
Al	1588	-5	-0.3%	285
Ni	10275	-15	-0.1%	558
Zn	2315	2	0.1%	973
Pb	1913.5	-8	-0.4%	84
Sn	19560	10	0.1%	8
	Average		-0.1%	3,381
Gold	1337.68	-0.37	0.0%
Silver	19.589	-0.026	-0.1%
Platinum	1083.8	0.8	0.1%
Palladium	686.5	2.5	0.4%
	Average PM		0.1%

 

SHFE Prices 06:53 BST	RMB	Change	% Change
Cu	36680	20	0.1%
AL	12030	45	0.4%
Zn	18195	55	0.3%
Pb	14210	-25	-0.2%
Ni	81270	290	0.4%
Sn	127510	40	0.0%
Average change (base metals)	0		0.2%
Rebar	2337	-4	-0.2%
Au	289.15	-0.85	-0.3%
Ag	4367	-35	-0.8%

 

Economic Agenda
BST	Country	Data	Actual	Expected	Previous
12:50am	Japan	M2 Money Stock y/y	3.3%	3.3%	3.4%
2:30am	China	CPI y/y	1.3%	1.7%	1.8%
2:30am	China	PPI y/y	-0.8%	-1.0%	-1.7%
5:30am	Japan	Tertiary Industry Activity m/m	0.3%	0.4%	0.7%
7:00am	Germany	German Trade Balance	19.4B	21.2B	21.4B
7:45am	France	French Gov Budget Balance			-61.8B
7:45am	France	French Industrial Production m/m		0.2%	-0.8%
9:30am	UK	Goods Trade Balance		-11.7B	-12.4B
9:30am	UK	Construction Output m/m		-1%	-1%
9:30am	UK	Consumer Inflation Expectations			2%
All Day	EU	Eurogroup Meetings
12:45pm	US	FOMC Member Rosengren Speaks
3:00pm	US	Wholesale Inventories m/m		0%	0%

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