METALS MORNING VIEW 01/08: Copper prices holds up, others consolidate

Volume has been average with 5,294 lots traded as of 06:17 BST.

This comes after a day of general gains on Monday, led by a 0.5% rally in zinc, copper closed up 0.4% and aluminium prices closed up 0.3%, while lead and tin were up 0.1% and nickel bucked the trend with a 0.5% decline.

Precious metals are firmer this morning with the PGMs up an average of 0.6%, while silver prices are up 0.2% and gold prices are up 0.1% at $1,270.10 per oz. This comes after a generally strong day for precious metals on Monday when prices closed up an average of 0.4%.

On the Shanghai Futures Exchange (SHFE), most of the base metals are weaker led by 1.2% and 1.1% losses in tin and nickel, respectively, with lead and zinc prices both off 0.2%, while copper is up 0.1% at 50,390 yuan ($7,500) per tonne and aluminium has bucked the trend with a 0.7% gain. Spot copper prices in Changjiang are down 0.2% at 50,050-50,250 yuan per tonne and the LME/Shanghai copper arb ratio is at 7.90.

In other metals in China, September iron ore prices on the Dalian Commodity Exchange are up 3.3% at 573 yuan per tonne. On the SHFE, steel rebar prices are up 1.4%, while gold prices are unchanged and silver prices are up 0.3%.

In international markets, spot Brent crude oil prices are up 0.3% at $52.76 per barrel, the yield on US ten-year treasuries is firmer at 2.3% and the German ten-year bund yield is little changed at 0.54%.

Equities were mixed on Monday with the Euro Stoxx 50 closing down 0.5% but the Dow closed up 0.3%, although the S&P 500 and Nasdaq composite closed off 0.1% and 0.4%, respectively. Asian markets are firmer though with the ASX 200 up 0.9%, the Hang Seng and Kospi are up 0.8%, the CSI 300 is up 0.7% and the Nikkei is up 0.3%.

The dollar index continues to sink, it set a fresh low for the year at 92.78 yesterday, it was recently quoted at 92.88 – more unrest in US president Donald Trump’s administration continues to weigh on the dollar. Conversely, the euro is strong at 1.1827, as are sterling at 1.3223, the yen at 110.20 and the Australian dollar at 0.8019. The yuan at 6.7185 is climbing; it is the strongest it has been since October 2016, while most of the other emerging currencies we follow are little changed-to-firmer, the exception being the rand, which at 13.1792 is weaker.

The economic agenda is busy – Chinese Caixin manufacturing PMI data came out strong at 51.1, after a previous reading of 50.4, while Japan’s manufacturing PMI dipped to 52.1 from 52.2 and the Bank of Japan’s core CPI held steady at 0.3%. Data out later includes manufacturing PMI out across Europe, EU flash GDP, with US data including personal income spending and PCE price index, final manufacturing PMI, ISM manufacturing PMI, ISM manufacturing prices, construction spending and total vehicle sales.

Copper prices are managing to generally hold on to most of its recent gains and the metal looks strong, while the other metals appear not to be convinced that they should be following copper’s lead. Nickel and tin prices have followed copper’s lead the most, but they are now consolidating, while lead and zinc have struggled to break higher and aluminium prices are struggling to even hold above nearby support.

Given we are in the summer slowdown, it is not that surprising that most of the metals are not gunning higher as it is a quiet time for consumers. This suggests that the buying in copper may be more to do with spec shorts covering. The funds trading Comex copper have become increasingly polarised in recent months. Option declaration tomorrow may be suppressing the likes of aluminium, we wait to see once declaration has passed whether the lids capping the metals are lifted. Given better Caixin PMI data we would have thought the metals would be more bullish this morning than they are.

Gold prices are holding up well, as they should be given the weaker dollar, the continuing dysfunction of Trump’s administration and potential for geopolitical issues to rise as North Korea seems to be pressing ahead with its missile agenda. Silver is following gold’s lead, while platinum is firmer and palladium is challenging recent high ground again. We wait to see what tonight’s US total vehicle sales data shows – a disappointing figure could weigh on the PGMs.

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