Rebounds pause ahead of FOMC decisions

Base metals closed up with gains of 0.8 percent yesterday, aluminium was the only metal to buck the trend with a 0.7 percent decline to $1,573, zinc led the rebound with a two percent rise, lead climbed 1.5 percent to set a fresh high for the year at $1,988, nickel was up 1.1 percent, tin climbed 0.6 percent and copper closed up 0.3 percent at $4,781 – all in all a bullish performance. Precious metals closed up an average of 0.4 percent, platinum rose 0.9 percent to $1,028, the others were up between 0.2 and 0.3 percent with gold prices closing at $1,315.50.

This morning, a weaker yen on the back of the Bank of Japan’s (boJ) latest proposals and a corresponding stronger dollar seems to be weighing on the metals. Aluminium is up 0.4 percent, the rest are down between 0.1 percent for copper ($4,774) and 0.5 percent for lead. Volume has been average with 5,412 lots traded, with copper, aluminium and zinc seeing most of the volume. Precious metals are mixed, gold and silver prices are off slightly, platinum is up 0.5 percent and palladium is up 0.2 percent. The PGMs are firmer as wage negotiations in South Africa are not getting anywhere.

In Shanghai, tin is off 0.2 percent, the rest are up 0.7 percent, led by a 1.2 percent gain in lead, with zinc and aluminium up 0.9 percent, while nickel is up 0.4 percent and copper is up 0.1 percent at Rmb 37,270. Spot copper in Changjiang is up 0.2 percent at Rmb 37,300-37,420, the backwardation with the November contracts is at an equivalent of $22 per tonne and the LME/Shanghai copper arb ratio has weakened to 7.81, meaning the arb window is closed. China’s copper imports were up two percent in August, while exports have surged.

In other metals in China, iron ore prices are little changed, steel rebar is down 0.6 percent, silver is unchanged and gold prices are up 0.1 percent. In international markets, Brent crude is up 0.8 percent at $46.55.

Equities were little changed yesterday ahead of today’s central bank decisions – the Euro Stoxx 50 closed off 0.1 percent and the Dow closed up 0.1 percent, but Asia is buoyant following the BoJ’s moves – the Nikkei is up 1.8 percent, the Hang Seng is up 0.8 percent, the CSI 300 and Kospi are up 0.4 percent and the ASX200 is up 0.7 percent.

In FX, the yen is weaker at 102.60, the dollar index is firmer at 96.24, the euro is weaker at 1.1133, sterling is last at 1.2976 and the aussie is at 0.7553. The yuan is weaker at 6.6720, the ringgit continues to weaken, while the rest are little changed.

The economic focus will now shift to the FOMC rate decision and statement, the BoJ kept interest rates unchanged at minus 0.1 percent, but they did overhaul policy, which has weakened the yen. Ahead lie a BoJ press conference, UK public sector borrowing requirement, the Bank of England’s quarterly bulletin, Chinese leading indicators, US crude oil inventories and then the FOMC economic projections, statement, interest rate decision and then the press conference.  

Copper prices continue to consolidate in what could be a bull-flag, while aluminium is holding around in low ground and the rest are climbing/rebounding. On balance, we feel the metals will work higher, although markets might run into some turbulence depending on what the FOMC do and say.

Gold prices are getting some lift this morning as the yen weakens, but in recent days/weeks they have been testing support above the $1,300 level and along this year’s up trend line. Prices therefore remain vulnerable and that is unlikely to change until we know how the market interprets this evening’s FOMC decisions. Silver and palladium are holding up better than gold and are also getting some lift, while platinum is getting some lift, but has suffered more than the other in recent weeks. Given lack of progress in the South African platinum industry’s wage deals, combined with the weaker price, we would expect platinum prices to be well supported now.

 

Overnight Performance
BST	06:52	+/-	+/- %	Lots
Cu	4774	-7	-0.1%	1439
Al	1580	7	0.4%	1334
Ni	10225	-50	-0.5%	907
Zn	2295.5	-3	-0.1%	1346
Pb	1975.5	-9.5	-0.5%	359
Sn	19385	-85	-0.4%	27
	Average		-0.2%	5,412
Gold	1314.18	-0.97	-0.1%
Silver	19.169	-0.051	-0.3%
Platinum	1033.4	5.4	0.5%
Palladium	682.6	1.6	0.2%
	Average PM		0.1%

 

SHFE Prices 06:53 BST	RMB	Change	% Change
Cu	37270	30	0.1%
AL	12145	110	0.9%
Zn	17985	165	0.9%
Pb	14605	180	1.2%
Ni	80330	340	0.4%
Sn	124260	-240	-0.2%
Average change (base metals)	0		0.6%
Rebar	2249	-14	-0.6%
Au	284.7	0.15	0.1%
Ag	4301	0	0.0%

 

Economic Agenda
BST	Country	Data	Actual	Expected	Previous
12:52am	Japan	Trade Balance	0.41T	0.50T	0.34T
5:18am	Japab	BOJ Policy Rate	-0.1%	-0.2%	-0.1%
5:18am	Japan	Monetary Policy Statement
Tentative	Japan	BOJ Press Conference
9:30am	UK	Public Sector Net Borrowing		10.5B	-1.5B
12:00pm	UK	BOE Quarterly Bulletin
2:00pm	China	CB Leading Index m/m			0.7%
3:30pm	US	Crude Oil Inventories		3.2M	-0.6M
7:00pm	US	FOMC Economic Projections
7:00pm	US	FOMC Statement
7:00pm	US	Federal Funds Rate		<0.50%	<0.50%
7:30pm	US	FOMC Press Conference

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