Market and product

The base metals remained on a back footing on Friday but some are getting a lift this morning, with aluminium up 0.6 percent, copper up 0.2 percent at $4,632.50, although zinc is down 0.5 percent. Volumes have been average with 5,513 lots traded as of 06:30 BST. The precious metals found some support on Friday, with prices closing up an average of 0.4 percent with gold prices up 0.6 percent at $1,272.70. This morning they are stronger still with an average gain of 0.7 percent, led by a 1.2 percent rise in silver to $17.29, while gold prices are up 0.4 percent at $1,278.

In Shanghai, the base metals are mixed this morning – lead is down one percent, tin is off 0.4 percent, copper is off 0.3 percent at Rmb 35,470, nickel is unchanged, zinc is up 0.7 percent and aluminium is up 1.6 percent. Spot copper in Changjiang is up 0.2 percent at Rmb 35,270-35,470, the spread is flat, while the LME/Shanghai copper arb ratio is widening, last at 7.67, meaning the arb window may be open to some traders.

In other markets in China, iron ore prices were trading around $54 on Friday, steel rebar is up one percent this morning, gold prices are up 0.8 percent and silver prices are up 0.5 percent. In international markets, Brent crude isup 1.3 percent at $48.50.

Equities were mixed on Friday, the Euro Stoxx 50 closed up 0.7 percent but the Dow closed down one percent and Asia is mixed between unchanged and positive this morning with the Nikkei, CSI 300 and Kospi little changed, the Hang Seng is up 1.1 percent and the ASX 200 is up 0.5 percent.

In FX – the dollar is upbeat with the dollar index rising to 94.63, conversely the currencies are weaker with the euro at 1.1310, as are sterling at 1.4358 and the aussie at 0.7278, while the yen is flat at 108.75. In emerging market (EM) currencies, the yuan is weakening and starting to trend lower, last at 6.5500 and the other currencies are following its lead, the exception being the rouble that is firmer on the back of stronger oil. The downturn in the EM currencies may well be a warning that the market is turning more risk off again.

Data out over the weekend was disappointing with Chinese industrial production, fixed asset investment and retail sales all missing their expected reading by 0.5 percent. This morning Japan’s PPI fell 4.2 percent, after a 3.8 percent previously, machine tool orders are weaker and data out this afternoon includes US Empire State manufacturing, NAHB housing market index and TIC long term purchases – see table for more details.

The sell-off in the base metals has halted for now as some buying is emerging this morning, but whether this turns out to be another dead-cat bounce, as was seen in the middle of last week, remains to be seen. The stronger oil price may well be helping to instil some confidence in the base metals. That said, Chinese data out on Saturday was disappointing, adding to the poor data out of late and that may well weigh on prices overall. In addition, the down turn in EM currencies may be another bearish indicator.

Gold prices are getting some lift and the fact they are doing so while the dollar is bouncing is a particular sign of strength.