Market and product

The markets recovered yesterday with the base metals closing up an average of 0.5 percent, led by a 1.9 percent rise in zinc that had been the one metal that has sold off the most recently, while tin was the only metal to drop, it closed down 0.7 percent, but it has recently been one of the stronger performers. Copper was up 0.3 percent at $4,981.50. Precious metals were mixed, gold closed off 0.5 percent at $1,126.20 as other markets recovered, while the other precious metals were up an average of 0.7 percent, with palladium up 1.5 percent at $656.

This morning the base metals are up an average of 0.3 percent, tin leads with a 0.8 percent gain, followed by copper that is up 0.6 percent at $5,011, compared with $4,945 this time yesterday; lead is down 0.3 percent, while the others are up between 0.2 and 0.4 percent. Volume has been light at 2,866 lots.

Precious metals are up an average of 0.6 percent, gold is little changed at $1,125.60, palladium is up 1.7 percent at $667, silver and platinum are up around 0.3 percent and platinum’s discount to gold is around $205.

In Shanghai, the base metals are up an average of 0.8 percent , aluminium is the only metal that is lower, it is down 0.3 percent, lead is up 1.9 percent, zinc is up 1.4 percent, copper is up 0.9 percent at Rmb 38,250, tin is up 0.8 percent and nickel is up 0.3 percent.

Spot copper in Changjiang is up 0.5 percent at Rmb 38,250-38,350, the backwardation with the futures has narrowed to an equivalent of $15 and the LME/Shanghai copper arb window remains more open for October deals than further forward, with the ratio around 1:8 for October, but dropping to 1:7.6 for forward months.

In other metals in Shanghai, gold is off 0.8 percent, silver is down 0.2 percent, steel rebar is off one percent and iron ore is lower at around $56.

Equities were mixed yesterday with the Euro Stoxx 50 off 0.3 percent, the Dow was up 0.3 percent, but the Nasdaq composite remained under pressure, closing down 0.6 percent, but Asia is upbeat this morning with the Nikkei up 3.1 percent, the Hang Seng is up 1.7 percent, the ASX200 is up 1.9 percent, the CSI 300 is up 0.9 percent and Kospi is up 0.7 percent. Has the mood changed, or has there been some short-covering ahead of the end of the quarter? Given some poor data out of Japan, it looks like the latter.

Currencies – the dollar index is consolidating around the 95.95 area, as is the yen at 119.90, the euro is edging higher last at 1.1245, as are the aussie at 0.7013 and the rouble at 64.63 and sterling is on a back footing at 1.5163. The yuan is stronger 6.3465 and the emerging market (EM) currencies we follow are firmer and off recent lows too. Using the EM currencies and yuan as a barometer, the pause/halt in their slide bodes well, that is as long as it lasts.

Today’s economic agenda is very busy – UK Gfk consumer confidence slipped to 3 from 7, Japan’s retail sales and industrial production disappointed, but housing starts climbed 8.8 percent. Later we get host of important data out of Europe and the UK including EU CPI data and US data includes ADP non-farm employment changes, Chicago PMI, crude oil inventories and FOMC member William Dudley and Fed Chair Janet Yellen are speaking – see table below for more details.

The base metals are pulling themselves out of the recent dive and the strength of metals and equities in Asia this morning may well see some follow through strength as there seems to be some end of month/quarter short-covering and bargain hunting around. Yesterday’s strong rebound in Glencore shares, which carried through in Hong Kong this morning, also seems to be instilling some confidence. As such, we look for an up day today, but as little seems to have changed we would not get too comfortable but would run with it while it lasts.

As the other markets are a bit more upbeat, gold is struggling, but prices are generally holding quite up well and we expect dips to be well supported as we do feel any respite in the other markets will be short-lived. Palladium remains strong, platinum and silver remain on a back footing, but may get some lift if the industrial metals manage to rebound further.