The base metals for the most part were under pressure on Monday, even though other markets took some comfort from hope for an 11th-hour deal over Greece. Average base metals prices were up 0.4 percent at the day’s highs and off 1.1 percent at the day’s lows – they closed down 0.5 percent, with copper off 0.2 percent at $5,655 and nickel off 1.4 percent at $12,475. There seemed some nervousness ahead China’s PMI data.
Precious metals were generally bearish yesterday, the exception was silver that closed up 0.5 percent at $16.15, while gold and the PGMs traded down between 1.2 and 2.4 percent with platinum falling to a low of $1,057.50 and palladium dropping to $691. Gold closed at $1,185.80. Platinum is now trading at a $116 discount to gold.
This morning the base metals are up 0.7 percent on average, led by a 1.4 percent rise in copper to $5,734, which has been supported by better than expected Chinese PMI data that climbed to 49.6 from 49.2 – still in contraction mode, but there is room for optimism. Nickel is up one percent at 12,595, while tin is the laggard with a 0.1 percent gain, but it has been by far the strongest metal in recent days. The other bullish aspect is that the market is firmer on higher volume, with 6,973 lots traded as of 06:04 BST – whether this is due to China being closed yesterday, or to do with the brighter PMI data is less clear.
Gold and silver prices are little changed with gold at $1,185.80 and silver at $16.13, but the PGMs have picked up off the floor with platinum up 0.9 percent at $1,067 and palladium at $698.40 – both PGMs remain oversold in our view.
In Shanghai, the base metals are mixed, with nickel and zinc down between 0.7 and one percent, copper is unchanged at Rmb 41,920, while aluminium, lead and tin are firmer between 0.3 and 0.6 percent. Spot copper in Changjiang is unchanged at Rmb 42,250-42,400, the backwardation with the futures is at an equivalent of $77 per tonne and the LME/Shanghai copper arb ratio is wider at 1 to 7.30 – so the arb window is still closed, but the ratio is moving closer to it reopening.
Precious metals and steel rebar in Shanghai are weaker with gold and silver off 1.1 percent and rebar off 0.9 percent. We would expect some pick-up in rebar as higher iron ore prices are likely to squeeze steel producers’ margins.
Equities were upbeat on progress over Greece – the Euro Stoxx 50 closed up 4.1 percent and the Dow closed up 0.6 percent. Asia is also upbeat this morning on the back of gains in Europe and on the better than expected Chinese PMI data. The Nikkei is up 1.6 percent, the Hang Seng is up 0.5 percent, the Kospi is up 1.2 percent and China’s CSI 300 has been volatile after last week’s weakness – it has been down 3.9 percent this morning, but is last up 0.7 percent. Whether gyrations in China’s equity markets are seen as a local issue, or spread to global equity markets, remains to be seen. If a lasting correction is seen to be getting underway then that could see some rotation into the likes of gold.
Currencies- the dollar is rising again with the dollar index last at 94.82 after a low last week of 93.56, better than expected US existing home sales data yesterday seems to have boosted confidence. The euro is falling this morning, last at 1,1267 – perhaps traders see a deal with Greece as a continuing burden on the euro. Sterling is pulling back from high ground, last at 1.5775, the yen is weaker at 123.73, as is the aussie at 0.7708, the rouble is at 53.79 and the yuan is at 6.2085.
The economic agenda is busy with a barrage of manufacturing and services flash PMI data across Europe and the US, Italian retail sales, UK industrial orders, US durable goods orders, US HPI, new home sales and Richmond manufacturing index – see table below for more details.
The base metals have been weak of late, the exception being tin, but this morning’s Chinese PMI data seems to have given prices a lift and volume this morning has been considerably higher than the recent average. So the metals are off to a firmer start, we will now have to see if there is follow through buying. Last Thursday’s attempt to rally quickly ran out of steam, we feel this rebound may last a bit longer. For the most part, the corrections from the May highs have been severe, so most of the metals look oversold and therefore ripe for some rebound. The degree will depend on whether it is just driven by shorts taking profits (short-covering), or whether it prompts fresh buying too.
The PGMs appear well oversold, so we would look for them to bounce, but with some progress on Greece, it may be that gold starts to struggle once again. Silver has been relatively subdued in recent week, albeit weak, but if the market gets more optimistic over China then we would expect that to tweak silver’s industrial demand.
| Overnight Performance | ||||
| BST | 06:04 | +/- | +/- % | Lots |
| Cu | 5734 | 79 | 1.4% | 3600 |
| Al | 1714 | 7 | 0.4% | 744 |
| Ni | 12595 | 120 | 1.0% | 1158 |
| Zn | 2044.5 | 9.5 | 0.5% | 1080 |
| Pb | 1775 | 10 | 0.6% | 375 |
| Sn | 15375 | 15 | 0.1% | 16 |
| Steel | 300 | 0 | 0.0% | Total |
| Average (BM ex-Steel) | 0.7% | 6,973 | ||
| Gold | 1185.8 | 0 | 0.0% | |
| Silver | 16.13 | -0.02 | -0.1% | |
| Platinum | 1067 | 10 | 0.9% | |
| Palladium | 698.4 | 4.4 | 0.6% | |
| Average PM | 0.4% | |||
| SHFE Prices 06:27 BST | Change | % Change | |
| Cu | 41920 | 20 | 0.0% |
| AL | 12750 | 35 | 0.3% |
| Zn | 15605 | -150 | -1.0% |
| Pb | 13035 | 75 | 0.6% |
| Ni | 94860 | -700 | -0.7% |
| Sn | 113980 | 460 | 0.4% |
| Average change (base metals) | -0.1% | ||
| Rebar | 2231 | -20 | -0.9% |
| Au | 240.05 | -2.7 | -1.1% |
| Ag | 3558 | -40 | -1.1% |
| Economic Agenda | |||||
| BST | Country | Data | ACTUAL | Expected | Previous |
| 2:35am | Japan | Flash Manufacturing PMI | 49.9 | 50.6 | 50.9 |
| 2:45am | China | HSBC Flash Manufacturing PMI | 49.6 | 49.4 | 49.2 |
| 8:00am | France | French Flash Manufacturing PMI | 50.1 | 49.4 | |
| 8:00am | France | French Flash Services PMI | 52.5 | 52.8 | |
| 8:30am | Germany | German Flash Manufacturing PMI | 51.5 | 51.1 | |
| 8:30am | Germany | German Flash Services PMI | 52.9 | 53 | |
| 9:00am | EU | Flash Manufacturing PMI | 52 | 52.2 | |
| 9:00am | EU | Flash Services PMI | 53.7 | 53.8 | |
| 10:00am | Italy | Italian Retail Sales m/m | 0.1% | -0.1% | |
| 11:00am | UK | CBI Industrial Order Expectations | 1 | -5 | |
| 1:00pm | US | FOMC Member Powell Speaks | |||
| 1:30pm | US | Core Durable Goods Orders m/m | 0.6% | -0.2% | |
| 1:30pm | US | Durable Goods Orders m/m | -0.6% | -1.0% | |
| 2:00pm | US | HPI m/m | 0.6% | 0.3% | |
| 2:45pm | US | Flash Manufacturing PMI | 54.2 | 54 | |
| 3:00pm | US | New Home Sales | 524K | 517K | |
| 3:00pm | US | Richmond Manufacturing Index | 3 | 1 | |
The post Metals get some lift on back of Chinese PMI data appeared first on The Bullion Desk.
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