After a strong performance on Tuesday and initial gains yesterday, the base metals went on to close mixed with only lead up strongly with a 1.4 percent gain to $1,713, while the rest were either side of unchanged with copper closing at $5,356 after a high of $5,434.50. Precious metals fell more uniformly, closing down an average of 1.8 percent, with gold down 1.4 percent at $1,107, while the PGMs fell around 2.2 percent.
Good US job openings data out of the US yesterday seems to have worried the market as it was seen as increasing the chance of the Fed raising rates at its September meeting, so much so that the seemly robust and broad based rally in equities was reversed and down with it came other asset classes – the Dow closed off 1.5 percent, while earlier the Euro Stoxx 50 had been up 1.1 percent. We do not think one piece of data should affect the Fed, so we see the market’s reaction as them wanting an excuse to consolidate, which perhaps suggests the the market may have been surprised by how far some of the rallies had gone.
This morning, the base metals are mixed with copper, aluminium and nickel off 0.3 percent, zinc and lead are down 0.6 percent, while tin, the recent laggard, is up one percent. Copper is last at $5,338, nickel at $9,970 and aluminium at $1,623. Volume in early trading has been light with 2,094 lots.
Precious metals are recouping some of yesterday’s losses with gains averaging 0.4 percent, with gold little changed at $1,107.90, silver up 0.3 percent, platinum up 0.4 percent and palladium up 0.6 percent. Given the jittery stock markets we are surprised gold fell the way it did.
In Shanghai, the base metals are down an average of 0.2 percent, led by nickel that is off 0.6 percent, tin is down 0.3 percent and aluminium is off 0.3 percent, while the rest are little changed, with copper up 0.1 percent at Rmb 40,850. Spot copper in Changjiang is by comparison off 1.3 percent, which has seen the backwardation with the futures shrink to around an equivalent of $10 per tonne. The LME/Shanghai copper arbitrage window remains open with the ratio at 7.63. Reports suggest copper stocks in bonded warehouse have fallen 540,000 tonnes, the lowest in 21 months – this suggests that the open arb window has encouraged metal imports from bonded warehouses into the market, which might be why spot prices have eased moe than futures.
Other metals in China are mixed with gold and silver prices off around 1.3 percent, steel rebar is down 0.6 percent while iron ore is steady at $58.20.
Equities in Asia are down, taking their cue from Wall Street and from continued deflationary pressure from falling PPI that dropped 3.6 percent in Japan and 5.9 percent in China, while CPI in China was up 2 percent. The Nikkei is off 2.9 percent, but that is after a 7.7 percent gain yesterday, the Hang Seng is off 1.9 percent, the CSI is off 0.3 percent and the ASX 200 is down 2 percent.
Currencies – the dollar index is at 96.05, the slide earlier in the week seems to have been arrested and currencies for the most part are consolidating with the euro at 1.1200, sterling at 1.5354, the aussie at 0.7013, the yen at 120.83, the rouble at 68.46, the yuan is weak at 6.4700, the rupiah has weakened further while the rupee, real and rand are consolidating. Brazil’s credit rating has been cut to junk by Standard & Poor’s having been investment grade for seven years.
The economic agenda is busy, data still to come includes French industrial production, UK house prices, the Bank of England rate decisions, recent votes and rate statement, while US data includes initial jobless claims, import prices, wholesale inventories, natural gas and crude oil inventories – see table below for more details.
The turn round in sentiment seems to have affected equities more than metals, but given metals have been rising off multi-year lows and equities rebounding after a correction from multi-year highs, perhaps that is not surprising and it just suggests consolidation. What it does highlight is that the market is likely to be increasingly nervous now ahead of the FOMC meeting on September 17, as well as remaining transfixed on China. On balance, with some supply responses now being seen, especially in copper, we would not be surprised to see the rallies edge high after a pause, we still feel the Fed is unlikely to move in September so yesterday’s afternoon jitters may be short-lived.
The pullback in gold and the industrial precious metals suggest a nervous market, we feel gold will remain supported in the medium term due to concerns over China and the contagion being felt in emerging markets, but in the short term it may struggle if the base metals continue with their rebounds. We feel the industrial precious metals may also have more room on the upside.
| BST | 06:13 | +/- | +/- % | Lots |
| Cu | 5,338 | -18 | -0.3% | 1215 |
| Al | 1623 | -5 | -0.3% | 253 |
| Ni | 9970 | -30 | -0.3% | 208 |
| Zn | 1806.5 | -10.5 | -0.6% | 388 |
| Pb | 1703.5 | -9.5 | -0.6% | 26 |
| Sn | 15095 | 145 | 1.0% | 4 |
| Steel | 300 | 0 | 0.0% | Total |
| Average (BM ex-Steel) | -0.2% | 2,094 | ||
| Gold | 1107.9 | 0.9 | 0.1% | |
| Silver | 14.63 | 0.05 | 0.3% | |
| Platinum | 981.9 | 3.9 | 0.4% | |
| Palladium | 578.5 | 3.5 | 0.6% | |
| Average PM | 0.4% | |||
| SHFE Prices 6:13 BST | Change | % Change | |
| Cu | 40850 | 30 | 0.1% |
| AL | 11970 | -40 | -0.3% |
| Zn | 14860 | 5 | 0.0% |
| Pb | 13340 | 15 | 0.1% |
| Ni | 77490 | -500 | -0.6% |
| Sn | 102390 | -450 | -0.4% |
| Average change (base metals) | 236.5 | -0.2% | |
| Rebar | 1951 | -12 | -0.6% |
| Au | 229.85 | -3.2 | -1.4% |
| Ag | 3319 | -41 | -1.2% |
| Economic Agenda | |||||
| BST | Country | Data | ACTUAL | Expected | Previous |
| 12:01am | UK | RICS House Price Balance | 53.0% | 46.0% | 44.0% |
| 12:50am | Japan | Core Machinery Orders m/m | -3.6% | 3.4% | -7.9% |
| 12:50am | Japan | PPI y/y | -3.6% | -3.2% | -3.1% |
| 2:30am | China | CPI y/y | 2.0% | 1.9% | 1.6% |
| 2:30am | China | PPI y/y | -5.9% | -5.6% | -5.4% |
| 6:30am | France | French Final Non-Farm Payrolls q/q | 0.2% | 0.2% | 0.2% |
| 7:45am | France | French Industrial Production m/m | 0.3% | -0.1% | |
| 8:00am | UK | Halifax HPI m/m | 0.5% | -0.6% | |
| 12:00pm | UK | MPC Official Bank Rate Votes | 1-0-8 | 1-0-8 | |
| 12:00pm | UK | Official Bank Rate | 0.5% | 0.5% | |
| 12:00pm | UK | Asset Purchase Facility | 375B | 375B | |
| 12:00pm | UK | MPC Asset Purchase Facility Votes | 0-0-9 | 0-0-9 | |
| Tentative | UK | MPC Rate Statement | |||
| Tentative | UK | Monetary Policy Summary | |||
| 1:30pm | US | Unemployment Claims | 279K | 282K | |
| 1:30pm | US | Import Prices m/m | -1.7% | -0.9% | |
| 3:00pm | US | Wholesale Inventories m/m | 0.2% | 0.9% | |
| 3:30pm | US | Natural Gas Storage | 76B | 94B | |
| 4:00pm | US | Crude Oil Inventories | 0.9M | 4.7M | |
| 6:01pm | US | 30-y Bond Auction | 2.88|2.3 | ||
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