Better Chinese data – suggest stimulus working as economy stabilising – but drop in Chinese equities is a headwind today
Precious metals remained weak yesterday, down an average of 0.5 percent; base metals were mixed as consolidation set-in with tin off 0.9 percent, aluminium off 0.2 percent, while the rest were up either side of 0.2 percent.
This morning consolidation remains the theme with base metals prices so far ranged between average gains of 0.8 percent and losses averaging 0.2 percent. Volume is a bit more upbeat with 5,998 lots traded as of 06:00 BST. Lead and tin are slightly weaker, while nickel leads on the upside with a 0.6 percent gain to $11,675, zinc is up 0.4 percent and aluminium and copper are up 0.1 percent with the latter at $5,589.50.
Precious metals are firmer this morning by an average of 0.5 percent, led by the PGMs that are up an average of 0.9 percent, while gold and silver prices are little changed as price struggle with the better geopolitical situation.
Data out of China shows GDP of 7 percent, unchanged from the first quarter but better than an expected 6.9 percent; industrial production climbed to 6.8 percent from 6.1 percent and fixed asset investments was unchanged at 11.4 percent, which was better than the 11.2 percent expected. Retail sales climbed 10.6 percent from 10.1 percent.
In Shanghai, the base metals are for the most part up, with aluminium and tin the exceptions, while the rest are firmer, led by a 1.7 percent gain in nickel, while copper is up 0.3 percent at Rmb 40,570. We are surprised the metals have not reacted more positively to the Chinese data – perhaps the feeling is the better data will reduce the likelihood of further stimulus measures. We would not be surprised if the better data does lead to a firmer tone later in LME metals.
Spot copper in Changjiang is up 0.3 percent at Rmb 41,200-41,400, the backwardation with the September futures is easier at an equivalent of $133 per tonne, while the LME/Shanghai copper arb ratio is at 7.41, which suggests the arb window may be open to some traders.
Precious metals in Shanghai were little changed, while steel rebar was off 0.8 percent and iron ore prices are trading around $50.50. Vale said it was closing 25-30 million tonnes of higher cost capacity and replacing it with lower cost material. We wait to see if other major iron ore producers make cuts too.
Equities – yesterday the Euro Stoxx 50 and Dow both closed higher by around 0.4-0.5 percent, with a 0.3 percent drop in US retail sales a disappointment. Asia is mixed this morning with the Nikkei up 0.4 percent, the Hang Seng is off 0.7 percent , the Kospi is up 0.4 percent but China’s CSI 300 is down 4.6 percent – so concern over China’s equity market lingers and that might be what has prevented the base metals from reacting more positively to the Chinese data. We now need to see if the equity pullback is due to fear of no more stimulus, or is it a continuation of the correction.
Currencies – the dollar remains bid with the dollar index at 96.73, conversely the euro is on a back footing at 1.0997. If the Chinese equity sell-off gathers pace again then the market may well revise their view of an earlier Fed rate rise and that could pull the rug from under the dollar again. Sterling is strong at 1.5646, as is the aussie at 0.7464, while the yen is weaker at 123.44. The rouble is at 56.36 and the yuan is flat-lined at 6.2086.
The economic agenda is busy, in addition to the Chinese data already out and discussed above, we get data on French CPI, UK employment data and US data includes: PPI, Empire State manufacturing, industrial production, capacity utilisation, crude oil inventories and the Beige book. In addition, there is a Eurogroup meeting, the Greek Prime Minister Alexis Tsipras will put the bailout terms in front of the Greek Parliament today, Fed Chair Janet Yellen testifies to the House Financial Services Committee and FOMC member John Williams is speaking – see table below for more details.
The base metals are still consolidating after the recent rebounds – so far they are not reacting that positively to the better Chinese economic data out earlier, but with the CSI 300 down 4.6 percent traders are nervous again. If equities stabilise then we may see a delayed reaction to the good economic news. Generally, the metals look well placed to extend gains, but they do need to keep momentum going, which may be an issue.
Precious metals – gold got some lift on the back of poor US retail sales data but gains have not been held on to. Same with silver and the PGMs are still struggling. If another rout in Chinese equities unfolds then that could pull the dollar lower that might underpin precious metals. But Fed Chair Janet Yellen’s speech this afternoon is likely to end-up setting the tone for the dollar and therefore gold.
| Overnight Performance | ||||
| BST | 06:02 | +/- | +/- % | Lots |
| Cu | 5589.5 | 4.5 | 0.1% | 2541 |
| Al | 1706.5 | 2 | 0.1% | 662 |
| Ni | 11675 | 70 | 0.6% | 900 |
| Zn | 2069 | 8 | 0.4% | 1610 |
| Pb | 1846.5 | -1 | -0.1% | 278 |
| Sn | 14535 | -40 | -0.3% | 7 |
| Steel | 300 | 0 | 0.0% | Total |
| Average (BM ex-Steel) | 0.1% | 5,998 | ||
| Gold | 1155.5 | -0.2 | 0.0% | |
| Silver | 15.35 | 0.02 | 0.1% | |
| Platinum | 1029.8 | 5.8 | 0.6% | |
| Palladium | 658.6 | 7.6 | 1.2% | |
| Average PM | 0.5% | |||
| SHFE Prices 06:04 BST | Change | % Change | |
| Cu | 40570 | 140 | 0.3% |
| AL | 12425 | -20 | -0.2% |
| Zn | 15640 | 120 | 0.8% |
| Pb | 13160 | 5 | 0.0% |
| Ni | 86230 | 1410 | 1.7% |
| Sn | 109230 | -40 | 0.0% |
| Average change (base metals) | 236.5 | 0.4% | |
| Rebar | 2057 | -16 | -0.8% |
| Au | 233.7 | 0.05 | 0.0% |
| Ag | 3355 | 0.05 | 0.0% |
| Economic Agenda | |||||
| BST | Country | Data | ACTUAL | Expected | Previous |
| 3:00am | China | GDP q/y | 7.0% | 6.9% | 7.0% |
| 3:00am | China | Industrial Production y/y | 6.8% | 6.0% | 6.1% |
| 3:00am | China | Fixed Asset Investment ytd/y | 11.4% | 11.2% | 11.4% |
| 3:00am | China | NBS Press Conference | |||
| 3:00am | China | Retail Sales y/y | 10.6% | 10.2% | 10.1% |
| 4:18am | Japan | Monetary Policy Statement | |||
| Tentative | Japan | BOJ Press Conference | |||
| 7:45am | France | French CPI m/m | 0.1% | 0.2% | |
| 9:30am | UK | Average Earnings Index 3m/y | 3.3% | 2.7% | |
| 9:30am | UK | Claimant Count Change | -8.9K | -6.5K | |
| 9:30am | UK | Unemployment Rate | 5.5% | 5.5% | |
| Tentative | Germany | German 10-y Bond Auction | 0.81|1.7 | ||
| All Day | EU | Eurogroup Meetings | |||
| 1:30pm | US | PPI m/m | 0.2% | 0.5% | |
| 1:30pm | US | Core PPI m/m | 0.1% | 0.1% | |
| 1:30pm | US | Empire State Manufacturing Index | 3.4 | -2 | |
| 2:15pm | US | Capacity Utilization Rate | 78.1% | 78.1% | |
| 2:15pm | US | Industrial Production m/m | 0.2% | -0.2% | |
| 3:00pm | US | Fed Chair Yellen Testifies | |||
| 3:30pm | US | Crude Oil Inventories | -2.0M | 0.4M | |
| 7:00pm | US | Beige Book | |||
| 8:00pm | US | FOMC Member Williams Speaks | |||
The post Better Chinese data, but metals held back by drop in Chinese equities today appeared first on The Bullion Desk.
No comments:
Post a Comment