The base metals sold off heavily yesterday as the markets became increasingly jittery over China and the escalation in the Greek saga – although for the metals fear that the correction in equities in China will spread to the wider economy seems to be the main driving force – the base metals closed down an average of 3.4 percent yesterday, led by a 7.5 percent drop on nickel. Copper closed off 3.1 percent at $5,567.50, aluminium was the least affected, it closed down 1.2 percent at $1,674.
Precious metals fell an average of 2.9 percent yesterday with the industrial metals off more than gold that fell 1.3 percent to $1,154.30. So despite the escalation in fears, gold still has not attracted safe-haven buying.
This morning the base metals have weakened further with average losses of 0.9 percent, with losses fairly evenly distributed across the metals with the exception of nickel that is off 0.3 percent to $10.740 – the others are down around one percent, with copper at $5,346 – the low on copper yesterday was $5,261.50 – the March low was $5,339.50. Lead is the only base metal still to be above its March low. Volume on the LME has been high with 10,114 lots traded, with good volume seen in everything apart from lead and tin – see table below for more details.
Gold is at $1,152.70, so little changed, while the industrial precious metals are off an average of 1.5 percent -so gold is acting as a safe-haven in that it is holding its value better than other metals, but it is not getting much net inflow.
In Shanghai, the base metals are down an average of 3.5 percent led by a five percent drop in nickel that is limit down and a 4.4 percent drop in copper to Rmb 38,630. The rest are down between 2.1 percent for lead and 3.9 percent for tin – see table below for more details. Spot copper in Changjiang is off four percent at Rmb 39,500-39,800, the backwardation with the futures is at an equivalent of $188 per tonne, which suggests there is still selling pressure on the futures – albeit not as much as yesterday when the back was $200. The LME/Shanghai copper arb ratio is at 7.38, so is borderline open.
Precious metals in Shanghai have silver off six percent, while gold is down 1.6 percent.
Equities – yesterday the Euro Stoxx 50 was down 2.1 percent, the Dow closed up 0.5 percent, suggesting some flight to safety into US equities – Asia this morning is suffering with China’s CSI off 5.1 percent, the Nikkei is off 2.5 percent, the Hang Seng is down 4.3 percent and the Kospi is off one percent.
Currencies – the dollar index is trending higher but is not running away on the upside, it is last at 96.63, the euro is holding up surprisingly well at 1.1008, sterling is weak at 1.5457, as is the aussie at 0.7415, while the yen is strong as it picks-up safe haven interest – it is last at 122.00. The yuan is little changed at 6.2100 and the rouble is weaker 56.60.
On the economic front – Japan’s economy watchers sentiment came in a 51, after an expected 53.30 – data out later includes crude oil inventories and US consumer credit. The agenda is busy with a Eurogroup meeting and the FOMC meeting minutes – see table below for more details.
The base metals are retesting support levels established after yesterday’s freefalls – they look vulnerable but we are somewhat surprised by the extent of yesterday’s falls so would not be surprised by some consolidation, but trading for the rest of the week could become quite choppy now as it looks as though European policymakers have given Greece an ultimatum to come up with an acceptable plan by Sunday.
The gold price is under pressure, but it has so far managed to hold above the March low of $1,142.90, the low yesterday being $1,148.10. Silver held its November/December low at $14.65, yesterday’s low being $14.68. The PGMs are continuing to freefall today. Overall the risk reduction sell-off in the PGMs seems excessive, so we see this as a downward spike in the making.
| Overnight Performance | ||||
| BST | 06:19 | +/- | +/- % | Lots |
| Cu | 5346 | -47 | -0.9% | 6203 |
| Al | 1656 | -18 | -1.1% | 1301 |
| Ni | 10740 | -30 | -0.3% | 1084 |
| Zn | 1933.5 | -20 | -1.0% | 1410 |
| Pb | 1714 | -19.5 | -1.1% | 108 |
| Sn | 13685 | -115 | -0.8% | 8 |
| Steel | 300 | 0 | 0.0% | Total |
| Average (BM ex-Steel) | -0.9% | 10,114 | ||
| Gold | 1152.7 | -1.6 | -0.1% | |
| Silver | 14.94 | -0.16 | -1.1% | |
| Platinum | 1021.9 | -14.1 | -1.4% | |
| Palladium | 638.5 | -13.5 | -2.1% | |
| Average PM | -1.2% | |||
| SHFE Prices 06:36 BST | Change | % Change | |
| Cu | 38630 | -1760 | -4.4% |
| AL | 12195 | -280 | -2.2% |
| Zn | 14715 | -550 | -3.6% |
| Pb | 12400 | -260 | -2.1% |
| Ni | 81630 | -4300 | -5.0% |
| Sn | 103800 | -4240 | -3.9% |
| Average change (base metals) | 236.5 | -3.5% | |
| Rebar | 1930 | -61 | -3.1% |
| Au | 232.9 | -3.8 | -1.6% |
| Ag | 3236 | -207 | -6.0% |
| Economic Agenda | |||||
| BST | Country | Data | ACTUAL | Expected | Previous |
| 12:01am | GBP | BRC Shop Price Index y/y | -1.3% | -1.9% | |
| 12:50am | JPY | Current Account | 1.64T | 1.39T | 1.27T |
| 12:50am | JPY | Bank Lending y/y | 2.5% | 2.6% | |
| 6:00am | JPY | Economy Watchers Sentiment | 51 | 53.2 | 53.3 |
| 8:00am | GBP | Halifax HPI m/m | 0.2% | -0.1% | |
| 10:30am | GBP | FPC Meeting Minutes | |||
| All Day | EUR | Eurogroup Meetings | |||
| 12:30pm | GBP | Annual Budget Release | |||
| 3:30pm | USD | Crude Oil Inventories | -0.6M | 2.4M | |
| 6:01pm | USD | 10-y Bond Auction | 2.46|2.7 | ||
| 7:00pm | USD | FOMC Meeting Minutes | |||
| 7:00pm | USD | FOMC Member Williams Speaks | |||
| 8:00pm | USD | Consumer Credit m/m | 18.5B | 20.5B | |
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