Market and product

The base metals were generally firmer on Monday, closing up an average of 0.5 percent, although copper was unchanged at $5,058, aluminium was off 0.5 percent, tin was up 0.1 percent, while the others were up between 1 to 1.4 percent. The precious metals were also mixed yesterday, with gold prices down one percent at $1,243.30, silver was unchanged while the PGMs were up an average of one percent – so on the way up the industrial precious metals were laggards, they are now giving back less of their gains as the market consolidates.

This morning zinc is off 0.3 percent, lead is up 0.5 percent, aluminium is up 0.2 percent, while the rest are little changed with copper prices at $5,054 – volume has been light at 3,967 lots.

The precious metals are up an average of 0.3 percent this morning, led by a 0.6 percent gain in silver to $15.90, gold and platinum are up 0.3 percent with gold prices at $1,246.60 and palladium is up 0.1 percent.

In Shanghai, the base metals are mixed, tin is down 0.9 percent, this is on top of a 1.6 percent decline yesterday – we have expected Chinese smelters to lead a supply response in tin given their stockpiles of Myanmar tin ores and concentrates. If local prices are falling then that may well be the first sign that a supply response is underway – that said it could also just be profit-taking after 47 percent rally since the November low. Zinc is up 0.4 percent, aluminium is up 0.3 percent and the rest are little changed. Copper is last at Rmb 38,210, the spread is at an equivalent of $17 per tonne and the LME/Shanghai copper arb ratio is at 7.56 suggesting the arb window is closed

In other markets in China, iron ore prices climbed 2.3 percent yesterday to $58.82, but prices are down 1.3 percent on the Dalian Exchange this morning. Steel rebar is up 0.9 percent this morning, gold is off 0.1 percent and silver is up 0.7 percent. In international markets crude oil prices are up 0.5 percent a $41.67.

Equities – were consolidating yesterday, the Euro Stoxx closed off 0.4 percent, the Dow closed up 0.1 percent and Asia is mixed this morning with the Nikkei up 1.9 percent (it was closed yesterday), the Hang Seng is off 0.1 percent, the CSI 300 is off 0.5 percent, the Kospi is up 0.4 percent and the ASX200 is off 0.3 percent.

In FX – the dollar index is last at 95.27, the low on Friday was 94.58, the euro is consolidating at 1.1257, as are sterling at 1.4392, euro-sterling at 0.7822, the aussie is firmer at 0.7616 and the yen is drifting, last at 112.05.

In emerging market (EM) currencies the yuan is weaker at 6.4874, other currencies are firm and are applying pressure to resistance, while the ringgit has broken higher to 3.9918. The strength of EM currencies suggests risk is on across markets.

The economic agenda is busy with a PMI data out across the regions, Japan’s manufacturing PMI dropped to 49.1 from 50.1 – there were two dips below 50 last year in May and March. Japan’s all industries activity did better it rose 2 percent, it was expected to be up 1.9 percent after a 0.9 percent fall previously. As well as manufacturing and services PMI across Europe, there is German Ifo business climate, a host of UK price data and public sector borrowing, German and EU ZEW economic sentiment, US house prices and Richmond manufacturing index – see table below for more details.

The base metals are split into three camps – copper and zinc are tapping on the ceiling looking to break higher, aluminium is hammering on the floor and is looking vulnerable, while lead, nickel and tin are consolidating in mid-range. Given firm oil and EM currencies we would not be surprised if there is more room on the upside – we wait to see if the all-important PMI data provides some encouragement.

The precious metals are in consolidation mode, but they have generally held up well, as have commodities in general and that we think suggests there is more interest in buying into commodity baskets.