Base metals closed down one percent on average yesterday – hit by poor Chinese PMI data – at the day’s lows prices were down an average of 1.9 percent, led by a 3.7 percent sell-off in nickel. Precious metals were weak across the board – closing down an average of 1.9 percent with the gold price at $1,084.90.
This morning the base metals are mixed with a slightly weaker bias as prices consolidate again. Copper is little changed at $5,190, aluminium, lead and zinc are off between 0.2 and 0.4 percent, while nickel and tin are 0.1 percent firmer. Volume has been light with 3,708 lots traded.
Precious metals continue to grind lower, they are down an average of 0.5 percent this morning, although that is skewed by a 1.7 percent drop in platinum that is last at $943 and is running at a $141 per ounce discount to the gold prices that is last at $1,084.
In Shanghai, the base metals are down an average of 1.2 percent led by a 2.1 percent fall in tin prices, while nickel is off 1.7 percent and lead is off 1.2 percent. Copper is down 0.9 percent at Rmb 37,870 and spot copper in Changjiang is off one percent at Rmb 38,300-38,500. The backwardation with the futures has narrowed to around $100 per tonne, while the LME/Shanghai copper arb ratio for nearby dates is at 7.41 that means the arb window is likely to be open for some traders, but the ratio falls the further forward you go. This could see more metal shift from bonded warehouses into the market/SHFE warehouses.
Precious metals in Shanghai are down, with silver off two percent and gold off 1.1 percent.
Equities – Disappointing US data and weak commodity prices led to a 0.5 percent drop in the Dow, while the Euro Stoxx 50 was up one percent underpinned by some stronger PMI data. This morning, Asia is mixed with the Nikkei down 0.3 percent, the Hang Seng is off 0.1 percent, while the CSI 300 is up 1.5 percent and the Kospi is up 0.9 percent.
Currencies – the dollar is holding up in high ground with the dollar index at 97.45, while the currencies are generally consolidating with the euro at 1.0950, sterling at 1.5600, the yen at 123.90, while the aussie is rebounding, last at 0.7366 and the rouble is at 62.61, having been as low as 64.19 earlier in the session. The yuan is extremely flat at 6.2094. The aussie is up as the RBA kept rates unchanged and sounded more upbeat, while the rouble is weak in line with the weaker oil prices – Brent crude is last trading around $49.70.
Data out late yesterday showed strong US total vehicle sales of 17.6 million units (mu) annualised in July, compared with an estimated 17.2 mu. Data out already today showed a slight decline in Japan’s monetary base and a fall in average cash earnings. Later we get data on UK house prices and construction PMI, Spanish unemployment, EU PPI and US factory orders and economic optimism – see table below for more details.
Sentiment across the metals remains bearish and that is weighing on prices that are extending to the downside. Even lead joined the pack yesterday with prices falling down below the March low. There do seem to be bouts of scale down buying across the board, but there seems a lack of follow through buying/short-covering. For now we expect the downward trends to dominate, but there is a risk of short-covering rallies should the right catalyst come about. Tin remains the exception as the market expects exports from Indonesia to slow now, but what is interesting is that tin prices in China remain under pressure – this is likely to prompt more exports from China.
The precious metals remain weak along with the other metals/commodities, gold and silver prices are holding up just above recent lows, while the PGMs have extended their falls today. We would watch the dollar closely, should the market feel the Fed will stay on hold for longer then that could see the dollar correct again and that could provide some support to the precious metals.
| Overnight Performance | ||||
| BST | 06:26:00 | +/- | +/- % | Lots |
| Cu | 5190 | -2 | 0.0% | 1932 |
| Al | 1607 | -4 | -0.2% | 292 |
| Ni | 10775 | 15 | 0.1% | 694 |
| Zn | 1896.5 | -5.5 | -0.3% | 653 |
| Pb | 1694 | -6.5 | -0.4% | 133 |
| Sn | 16000 | 20 | 0.1% | 4 |
| Steel | 300 | 0 | 0.0% | Total |
| Average (BM ex-Steel) | -0.1% | 3708 | ||
| Gold | 1084.2 | -0.7 | -0.1% | |
| Silver | 14.48 | 0.02 | 0.1% | |
| Platinum | 943 | -16 | -1.7% | |
| Palladium | 593.1 | -1.9 | -0.3% | |
| Average PM | -0.5% | |||
| SHFE Prices 6:32 BST | Change | % Change | |
| Cu | 37870 | -330 | -0.9% |
| AL | 12100 | -70 | -0.6% |
| Zn | 14615 | -110 | -0.7% |
| Pb | 12815 | -155 | -1.2% |
| Ni | 80430 | -1360 | -1.7% |
| Sn | 108120 | -2480 | -2.2% |
| Average change (base metals) | 236.5 | -1.2% | |
| Rebar | 2086 | -13 | -0.6% |
| Au | 218.55 | 2.35 | 1.1% |
| Ag | 3189 | -64 | -2.0% |
| Economic Agenda | |||||
| BST | Country | Data | ACTUAL | Expected | Previous |
| 12:50am | Japan | Monetary Base y/y | 32.8% | 32.2% | 34.2% |
| 2:30am | Japan | Average Cash Earnings y/y | -2.4% | 0.9% | 0.7% |
| 7:00am | UK | Nationwide HPI m/m | 0.4% | -0.2% | |
| 8:00am | Spain | Spanish Unemployment Change | -45.6K | -94.7K | |
| 9:30am | UK | Construction PMI | 58.6 | 58.1 | |
| 10:00am | EU | PPI m/m | -0.1% | 0.0% | |
| 3:00pm | US | Factory Orders m/m | 1.8% | -1.0% | |
| 3:00pm | US | IBD/TIPP Economic Optimism | 48 | 48.1 | |
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