Key development – China’s leading indicators rose just 0.2 percent – the lowest rise since April 2013. Japan’s trade balance turns positive
Recap of Tuesday – Base metals were mixed, tin continued with its rebound, it rose 5.1 percent to $15,560, lead and zinc were up around one percent, aluminium was little changed while copper was off one percent at $5,933 and nickel lost 0.7 percent.
Precious metals were up an average pf 0.2 percent, with gold, silver and platinum up an average of 0.4 percent, while palladium was off 0.5 percent. A slight stalling in the dollar rebound helped the complex.
This morning – Trading volume has been light with 3,358 lots traded, 1,774 of those have been in copper. Prices across the base metals are up an average of 0.4 percent, with lead in the driving seat with a 0.8 percent gain to $2,056, while copper and nickel are up 0.5 percent at $5,965 and $12,745 respectively. Tin is off just 0.1 percent at $15,550 – so maybe the gyrations in tin have run through the market for now.
Precious metals are off slightly with prices down between 0.1 and 0.2 percent with gold at $1,200.80.
Shanghai – The June base metals are generally up across the board by an average of 0.5 percent, tin is up 1.2 percent, lead is up 0.9 percent, zinc is up 0.7 percent while the rest are either little changed as in the case of copper at Rmb 43,350, or up 0.2 to 0.3 percent as is the case of nickel and aluminium. Steel rebar is up one percent.
Spot copper in Changjiang is off 0.1 percent at Rmb 43,500-43,680, the backwardation with the futures is wider at $53 per tonne and the LME/Shanghai copper arb ratio has widened to 1 to 7.26 as LME prices run up faster than those in Shanghai.
The June precious metals in Shanghai are firmer with gold up 0.2 percent and silver up 0.3 percent.
Other markets – Equities yesterday saw the Euro Stoxx 50 little changed, while the Dow closed off 0.5 percent. In Asia this morning, the markets are generally positive, the Nikkei is up 0.9 percent helped by a swing in the trade balance to a small surplus, the Hang Seng is up 0.3 percent, the CSI 300 is up two percent and the Kospi is off 0.2 percent. Chinese equities are pushing the envelope on the upside on the back of expectations for further stimulus. Confidence seems to be running high that the economy is set to expand as the Silk Road infrastructure projects and government reforms kick-in – given more debt defaults are being seen it looks as though a pick-up in growth is certainly needed. It will be interesting to see what tomorrow’s flash PMI data holds.
Currencies – the dollar’s latest three-day uptick seems to be struggling with the dollar index at 97.88 after a peak yesterday of 98.46 – so the double top on the dollar could still be in place. The euro is last at 1.0742, sterling is trying higher, last at 1.4940, as is the aussie at 0.7771, the yen remains weak at 119.55 as does the rouble at 53.14, after a high of 48.43. The emerging market currencies of the real, rand, rupee and rupiah are all slightly firmer too.
Economic Agenda – Japan’s trade deficit has been declining in recent months, but the latest reading came in showing a switch to a small surplus, while China’s leading index climbed just 0.2 percent. Later we get the UK Monetary Policy Committee’s latest votes on interest rates and asset purchase facility, Italian retail sales, EU consumer confidence, US HPI, exiting homes sales and crude oil inventories – see table above.
Near term view – Copper’s pull back from Friday’s high is now consolidating just below the $6,000 level – the market is having to absorb a generallly dull outlook from last week’s CESCO meeting in Chile. The other metals are looking more upbeat led by rebounds in lead, zinc and aluminium, while tin is still forming the right hand side of its downward spike- ie the recovery side. For now we feel there is room for further gains, especially if the dollar weakens again.
Gold continues to consolidate and has a bit of an upside bias, while the other precious metals are drifting lower as they consolidate and face the headwind from strong equities. We wait to see if the dollar weakens further, if it does we would expect the metals to pick-up.
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