The metals put in a strong performance yesterday with both base and precious metals in positive territory with copper leading the way with a gain of 4.2 percent to $5,352.50, followed by nickel that was up three percent to $9,995. Precious metals were split into the industrial metals that were up around 1.7 percent, while the better atmosphere in the markets, with equities also up with the Euro Stoxx 50 and Dow up 1.1 and 2.4 percent respectively, meant gold struggled – it closed up 0.2 percent at $1,122.30.
In early trading this morning, the markets are up again with the base metals up an average of 0.8 percent, with most of the metals up between 0.8 and 1.1 percent, the laggard yesterday and this morning being tin. Copper is up one percent at $5,406 – it is up $277, some 5.4 percent since this time yesterday. Volume as of 06:06 BST was 7,037 lots, well above last week’s average for this time of day of 3,700 lots. So good volume and stronger prices bodes well for near term momentum.
In Shanghai, the base metals are up an average of 2.3 percent, copper is up 4.7 percent at Rmb 41,250, nickel is up 2.8 percent, zinc 2.2 percent (the latter two being metals used by the steel industry that is likely to be ramping up after the government forced closures ahead of last week’s Victory parade), while the rest are up between 1.0 to 1.7 percent.
Spot copper in Changjiang is all but matching the gains on the futures, it is up 4.6 percent to Rmb 40,950-41,450, which puts it either side the futures and the LME/Shanghai copper arb window has stayed open with the ratio at 7.6 for the October contract.
Silver leads the precious metals in Shanghai with a 1.8 percent gain, gold is up 0.8 percent and in other metals steel rebar is up 1.6 percent and iron ore is stronger at $57.43.
Equities are positive in Asia as risk appetite is back on as the markets feel the China will manage to stabilise its markets. The Nikkei up a whopping 5.7 percent, the Hang Seng is up 2.9 percent, the CSI is up 1.5 percent, the ASX 200 is up 1.7 percent and the Kospi is up 2.5 percent. We would say the rally is a relief one, heavily based on the belief China will stimulate the economy. The markets may also be bullish on the belief the Fed will delay raising rates now that the World Bank and joined the IMF is warning the US that raising rates now could cause “panic and turmoil” in emerging markets.
Currencies – the dollar does not seem to be listening to the World Bank’s latest warning as the dollar index is back at 96.16, reversing the recent weaker tone and as the dollar has picked up, the euro is edging lower, last at 1.1156, as is the yen at 120.38, while sterling is holding on to yesterday’s gains better, last at 1.5380 and the aussie and rouble are rising, last at 0.7056 and 67.00, no doubt as the commodities rebound. The yuan remains weak, the rupiah and real are consolidating above recent lows, while the rupee and rand are finding some strength.
The economic agenda is fairly lightweight today – data already out of Japan showed some improvement with M2 money stock and consumer confidence rising, later UK data includes trade balance, industrial and manufacturing production and US data includes the Jolts job opening data – see table below for more details.
We have generally thought that the rebounds that started two weeks back had room to extend and that is now underway, led by strong gains in copper, which is not surprising given the latest large cutback announcement, aluminium is also out in the lead, climbing above recent highs and the others look well placed to follow. These types of gains may well prompt more short-covering – last week nickel started to see more short covering by money managers, but most of the others saw fresh selling as well as fresh buying, but in all cases the buying outweighed the selling. So for now we feel there is room for the rallies to continue, but we would be wary of getting too bullish as further setbacks in China, or further contagion from China in emerging markets might not be that far away.
The precious metals are trying higher, gold is hold up well considering the strength in other markets, while the more industrial precious metals are attempting to rally but they seem to have the hand-brake on – we think that if the base metals and equities continue to rise then the hand-brakes will be released.
| BST | 06:08 | +/- | +/- % | Lots |
| Cu | 5,406 | 53 | 1.0% | 4042 |
| Al | 1646 | 13.5 | 0.8% | 815 |
| Ni | 10105 | 110 | 1.1% | 900 |
| Zn | 1836.5 | 16.5 | 0.9% | 1049 |
| Pb | 1705 | 16 | 0.9% | 222 |
| Sn | 14975 | 45 | 0.3% | 9 |
| Steel | 300 | 0 | 0.0% | Total |
| Average (BM ex-Steel) | 0.8% | 7,037 | ||
| Gold | 1123.4 | 1.1 | 0.1% | |
| Silver | 14.85 | 0.08 | 0.5% | |
| Platinum | 1006.4 | 5.4 | 0.5% | |
| Palladium | 593.5 | 5.5 | 0.9% | |
| Average PM | 0.5% | |||
| SHFE Prices 6:08 BST | Change | % Change | |
| Cu | 41250 | 1860 | 4.7% |
| AL | 12035 | 150 | 1.3% |
| Zn | 14935 | 325 | 2.2% |
| Pb | 13330 | 135 | 1.0% |
| Ni | 78230 | 2160 | 2.8% |
| Sn | 103150 | 1690 | 1.7% |
| Average change (base metals) | 236.5 | 2.3% | |
| Rebar | 1959 | 30 | 1.6% |
| Au | 233.15 | 1 | 0.4% |
| Ag | 3369 | 60 | 1.8% |
| Economic Agenda | |||||
| BST | Country | Data | ACTUAL | Expected | Previous |
| 12:01am | UK | BRC Shop Price Index y/y | -1.4% | -1.4% | |
| 12:50am | Japan | M2 Money Stock y/y | 4.2% | 4.1% | 4.0% |
| 6:00am | Japan | Consumer Confidence | 41.7 | 40.6 | 40.3 |
| 7:00am | Japan | Prelim Machine Tool Orders y/y | 1.7% | ||
| 9:30am | UK | Manufacturing Production m/m | 0.2% | 0.2% | |
| 9:30am | UK | Trade Balance | -9.5B | -9.2B | |
| 9:30am | UK | Industrial Production m/m | 0.1% | -0.4% | |
| Tentative | Germany | German 10-y Bond Auction | 0.61|1.3 | ||
| 3:00pm | UK | NIESR GDP Estimate | 0.7% | ||
| 3:00pm | US | JOLTS Job Openings | 5.30M | 5.25M | |
| 6:01pm | US | 10-y Bond Auction | 2.12|2.4 | ||
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