Base metals were weaker on Friday except for tin as investors likely finished to digest recent positive macroeconomic data (released earlier last week) pointing to stabilisation of China’s economy. Although tin was sharply up by 4.7 percent, the rest of the base metals complex posted losses, led by copper and nickel (down 1.2 percent each), followed by aluminium (down 0.8 percent), zinc (down 0.4 percent) while lead was about unchanged (down 0.1 percent).
Similarly, precious metals pushed sharply lower, partly reflecting an appreciating US dollar against most currencies (except the yuan), higher real interest rates, as evidenced by the 10-year US TIPS yield up 1.05 basis points (or 2.15 percent), and an ongoing reduction in safe-haven flows as a result of optimism over a Greek bailout deal. The precious metals complex posted an average loss of 1.5 percent, led by palladium and platinum (down by 2.4 and 1.6 percent respectively), followed by silver (down 1.1 percent) and gold (down 0.9 percent).
This morning, base metals are slightly down, posting an average loss of 0.5 percent, with lead down by 0.9 percent, followed by zinc (down 0.7 percent), copper (down 0.5 percent), and aluminium (down 0.1 percent). Nickel is however slightly up by 0.2 percent. Precious metals have experienced extreme selling pressure since the open, with gold, silver, palladium, and platinum reaching new 2015 lows (on an intraday basis), before rebounding somewhat.
In Shanghai, the July base metals contracts are weaker, with copper, zinc, and aluminium down 1.8 percent, 1.0 percent, and 0.6 percent, respectively. In contrast, lead is broadly unchanged (down 0.1 percent) while tin is up by 1.1 percent. Meanwhile, spot copper in Changjiang is down 1.5 percent at Rmb 40,300-40,450, while the backwardation with the futures is at $87 per tonne and the LME/Shaghai copper arb ratio is at 1 to 7.59, indicating that the arb window is open. In the precious metals complex, gold and silver are sharply weaker, down 3.2 percent and 2.4 percent, respectively.
Bonds – Government bonds rallied on Friday. The US 10-year yield was slightly down 0.34 basis point as although Fed Chair Yellen’s testimony on the economy on July 15-16 suggested a possible initial increase in the federal funds rate at some point this year, US CPI (released Friday) remained unchanged at 0.3 percent in June, therefore showing no signs that inflation will move back to FOMC’s 2 percent objective. European bonds rallied sharply after German lawmakers approved negotiations for a third Greek bailout while earlier last week ECB President Draghi decided to raise emergency liquidity assistance (ELA) by 900 million euros to Greek banks over one week. The Germany 10-year yield was sharply down 4.5 basis points (or 5.4 percent) to 0.788 percent while the Portugal 10-year yield edged 3.6 basis points (or 1.34 percent) down to 2.641, suggesting that fears of contagion, albeit muted, have continued to dissipate.
Equities – Broad equities traded sideways with a slight downward bias on Friday after posting strong gains earlier this week stemming from the de-escalation of the Greek crisis. The Euro Stoxx 50 ended 0.17 percent lower and the Dow Jones was slightly down 0.19 percent. In Asia this morning, equities are consolidating a little after having rebounded since July 8, with the Hang Seng down 0.24 percent, the CSI 300 down 0.93 percent and the Kospi is down 0.24 percent.
Currencies – The US dollar pushed higher on Friday, partly reflecting stronger-than-expected building permits (1.34 million versus 1.11 million expected) and housing starts (1.17 million versus 1.10 million expected) in June, coupled with a weaker euro driven by ongoing divergence between US and EU monetary policies. The yen was broadly unchanged after witnessing strong declines earlier this week as the central bank of Japan reaffirmed its commitment to maintain an ultra-accommodative stance at its June monetary policy meeting.
The economic agenda is fairly quiet today.
Economic data released this morning indicated that new loans in China amounted to 1.279T in June, above market expectations of 1.050T, an up from 0.901T in May, while German PPI declined 0.1 percent in June, below market expectations of 0.0 percent, and down from 0.0 percent the prior month.
Economic data published later today will include current account in the eurozone for May while the Bundesbank will release its monthly monetary policy report.
The base metals complex (except for tin) appears to be under renewed selling pressure, partly reflecting deflationary pressure resulting from strong declines in oil prices and an appreciating dollar. The bottoming-out process, which has emerged since the start of July, could therefore be invalidated should deflationary risks continue to increase.
The precious metals complex is under intense selling pressure, with all the metals reaching a new year low this morning. While no catalyst appears to have triggered the huge sell-off, investor sentiment has been severely undermined, suggesting that the panic could continue later today when the US markets will be open.
| Overnight Performance | ||||
| BST | 06:32 | +/- | +/- % | Lots |
| Cu | 5454.5 | -27 | -0.5% | 2545 |
| Al | 1696 | -2.5 | -0.1% | 316 |
| Ni | 11460 | 20 | 0.2% | 541 |
| Zn | 2045.5 | -15 | -0.7% | 604 |
| Pb | 1817 | -16.5 | -0.9% | 291 |
| Sn | 15650 | -100 | -0.6% | 46 |
| Steel | 300 | 0 | 0.0% | Total |
| Average (BM ex-Steel) | -0.5% | 4,343 | ||
| Gold | 1105.9 | -28.4 | -2.5% | |
| Silver | 14.58 | -0.26 | -1.8% | |
| Platinum | 968.4 | -23.6 | -2.4% | |
| Palladium | 603.9 | -9.1 | -1.5% | |
| Average PM | -2.0% | |||
| SHFE Prices 06:44 BST | Change | % Change | |
| Cu | 39760 | -710 | -1.8% |
| AL | 12430 | -80 | -0.6% |
| Zn | 15510 | -155 | -1.0% |
| Pb | 13090 | -10 | -0.1% |
| Ni | 84940 | -270 | -0.3% |
| Sn | 111250 | 1190 | 1.1% |
| Average change (base metals) | -0.4% | ||
| Rebar | 2082 | 38 | 1.9% |
| Au | 223.7 | -7.45 | -3.2% |
| Ag | 3209 | -78 | -2.4% |
| Economic Agenda | |||||
| BST | Country | Data | ACTUAL | Expected | Previous |
| 1:19am | China | New Loans | 1.279T | 1.050T | 0.901T |
| 7:00am | EU |
German PPI m/m
|
-0.10% | 0.00% | 0.00% |
| 9:00am | EU | Current Account | 23.1B | 22.3B | |
| 11:00am | EU | German Buba Monthly Report | |||
| 7:30pm | US | Treasury Sec Lew speaks | |||
The post Panic in precious metals, base metals under pressure appeared first on The Bullion Desk.
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