Metals prices consolidate, nickel market absorbing Philippine news

Another mixed performance in the base metals on Monday, with nickel closing off 1.6 percent at $10,465 and copper closing down 0.2 percent at $4,844.50, while the rest of the complex shook off earlier losses to close higher, led by a 1.5 percent rebound in lead and a 1.4 percent gain in aluminium to $1,660. Precious metals were generally weaker with gold prices little changed at $1,338.15, while the rest were off by around 1.1 percent.

This morning equity markets (but not the metals) seem to be undergoing a relief rally,  as they saw that Hilary Clinton won the first US Presidential election debate against Donald Trump. In other news, in the Philippines only ten mines out of the nation’s 40 had passed the environmental audit – the suspended mines accounted for 55.5 percent of the Philippine’s nickel output last year. We would expect that is worse than the market has already discounted, but so far nickel prices are not reacting positively, which suggest the initial reaction is ‘buy the rumour sell the fact’, but that may not last, we think.

The base metals are off an average of 0.4 percent led by a 0.9 percent drop in nickel to $10,375, copper is off 0.5 percent at $4,820 and tin is down 0.4 percent, the rest are off between 0.1 and 0.2 percent. Volume has been average with 5,511 lots traded as of 05:56 BST. Nickel has traded the most, with 1,648 lots traded, followed by copper with 1,337, aluminium with 1,314 and zinc with 966.

Precious metals are mixed, gold is off 0.2 percent at $1,335.20, silver and platinum are up slightly, while palladium is up 1.2 percent at $698.

In Shanghai, the base metals are also mixed with nickel off 2.2 percent, tin is down 1.2 percent and copper is off 0.6 percent at Rmb 37,530, the rest are up between 0.4 percent for zinc and 1.6 percent for lead. Spot copper in Changjiang is off 0.1 percent at Rmb 37,660-37,860, the backwardation has widened to an equivalent of $50 per tonne and the LME/Shanghai copper arb ratio is wider at 7.79.

In other metals in China, iron ore futures in Dalian are down 2.1 percent, steel rebar is off 2.4 percent, silver is off 0.9 percent and gold is off 0.1 percent. In international markets Brent crude oil is up 0.5 percent at $47.12.

Equities were under pressure yesterday and the drop in Deutsche Bank shares that fell 7.5 percent weighed on sentiment with the Euro Stoxx 50 closing off 1.9 percent and the Dow closed down 0.9 percent. Asian markets are, however, reacting to the US Presidential debate and are for the most part firmer, with the Nikkei up 0.5 percent, the Hang Seng is up 1.2 percent, the Kospi is up 0.8 percent, CSI 300 is up 0.1 percent, but the ASX 200 is off 0.4 percent.

In FX, the dollar index is rangebound, last at 95.38, the euro is firmer at 1.1242, as are the aussie at 0.7661 and the yen at 100.71, while sterling is weak at 1.2971. The yuan is flat at 6.6694 and the other emerging market currencies we follow have a slight firmer tone this morning, especially the rupee and rupiah.

The economic agenda is busy, Japanese services PPI climbed 0.2 percent, data out later includes German import prices, EU M3 money supply, private loans, UK realised sales, US house price index, consumer confidence and Richmond manufacturing index. FOMC member Stanley Fischer is also speaking – he tends to be fairly neutral on the hawk/dove scale.

The base metals are consolidating recent moves, which for most means prices are drifting after recent gains, while for lead prices consolidating after rebounding yesterday. The overall direction seems bullish and we would expect dips to remain well supported and for prices to work higher, but do so gradually as they have to absorb scale up selling along the way. Nickel prices have rallied strongly in recent months in anticipation of the mining suspensions so the news may be in the price, but the determination of the new government seems to suggest that they mean business. As such, we do expect the impact to be long lasting and therefore see this as being medium term bullish, although given nickel stocks we do not see any shortage developing – it will just depend on what price the stockholders are willing to sell at.

Gold prices have paused again ahead of resistance from the resistance line linking the peaks that have developed since the July high, silver and platinum have followed gold’s lead, while palladium has broken up through its resistance line. Given the size of the gross long fund positions, it means sentiment is bullish, but if prices fail to make upside progress then there is a danger that stale long liquidation could unfold. 

 

Overnight Performance
BST	05:56	+/-	+/- %	Lots
Cu	4820	-25	-0.5%	1337
Al	1657.5	-2.5	-0.2%	1314
Ni	10375	-90	-0.9%	1648
Zn	2284	-3	-0.1%	966
Pb	1942.5	-4	-0.2%	236
Sn	19650	-75	-0.4%	10
	Average		-0.4%	5,511
Gold	1335.2	-2.95	-0.2%
Silver	19.465	0.045	0.2%
Platinum	1038.4	0.4	0.0%
Palladium	698	8	1.2%
	Average PM		0.3%

 

SHFE Prices 06:15 BST	RMB	Change	% Change
Cu	37530	-240	-0.6%
AL	12495	80	0.6%
Zn	17780	65	0.4%
Pb	14630	225	1.6%
Ni	80430	-1780	-2.2%
Sn	125750	-1470	-1.2%
Average change (base metals)	0		-0.2%
Rebar	2267	-56	-2.4%
Au	287.95	-0.35	-0.1%
Ag	4322	-38	-0.9%

 

Economic Agenda
BST	Country	Data	Actual	Expected	Previous
12:50am	Japan	Monetary Policy Meeting Minutes
12:50am	Japan	SPPI y/y	0.2%	0.3%	0.3%
7:00am	Germany	German Import Prices m/m		-0.1%	0.1%
9:00am	EU	M3 Money Supply y/y		4.9%	4.8%
9:00am	EU	Private Loans y/y		1.9%	1.8%
11:00am	UK	CBI Realized Sales		8	9
2:00pm	US	S&P/CS Composite-20 HPI y/y		5.0%	5.1%
2:45pm	US	Flash Services PMI		51.1	51
3:00pm	US	CB Consumer Confidence		98.6	101.1
3:00pm	US	Richmond Manufacturing Index		-2	-11
4:15pm	US	FOMC Member Fischer Speaks

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