MORNING VIEW: Base metals upbeat despite numerous global headwinds

The base metals were generally upbeat this morning, Friday November 20, supported by demand expectations and a weaker dollar.

  • Metals unfazed by US Treasury Secretary Steven Mnuchin’s call not to extend emergency lending programs to businesses
  • European Union still struggling to pass its €1.18 billion ($1.40 billion) coronavirus rescue package

Base metals
Three-month base metals prices on the London Metal Exchange were mainly stronger, the exception was tin that was down by 0.5% at $18,660 per tonne, while the rest were up by between 0.5% for both aluminium ($1,998 per tonne) and nickel ($15,925 per tonne) and 0.9% for zinc ($2,778.50 per tonne). Copper was up by 0.6% at $7,136 per tonne.

Likewise, the most-traded base metals contracts on the Shanghai Futures Exchange were mainly up, the exception again being January tin that was down by 1.3%, while the rest were up by an average of 1.5% – led by a 2.7% rise in December lead that seems to be playing catch-up, while January copper was up by 0.9% at 53,260 yuan ($8,094) per tonne.

Precious metals
Spot gold prices were down by 0.2% at $1,867.40 per oz, silver was up by 0.8% at $24.14 per oz, platinum was up by 1.1% at $957.10 per oz and palladium was up by 0.9% at $2,337.50 per oz.

Wider markets
The yield on US 10-year treasuries has edged lower, it was recently quoted at 0.83%, this after 0.86% at a similar time on Thursday.

Asia-Pacific equities were mixed this morning: the ASX 200 (-0.12%), the Nikkei (-0.42%), the Kospi (+0.24%), the CSI (+0.31%) and the Hang Seng (+0.24%).

Currencies
The US dollar index is weak and in low ground and was recently quoted at 92.21, this after 92.45 at a similar time on Thursday – support is seen between 92.13 and 91.73.

While the dollar is weak, the other major currencies were firmer: the euro (1.1887), sterling (1.3282), the Australian dollar (0.7297) and the yen (103.75).

Key data
Data already out on Friday showed the read of the United Kingdom’s consumer confidence from GfK fall to -33 in November, from -31in October, and Japan’s flash manufacturing purchasing managers index (PMI) fell to 48.3 in November, from 48.7 in October.

Data out later includes the German producer price index, UK retail sales, UK public sector borrowing and EU consumer confidence.

In addition, European Central Bank President Christine Lagarde and Federal Open Market Committee member Robert Kaplan are scheduled to speak.

Today’s key themes and views
The base metals remain upbeat despite some hesitation in major equity indices and that suggests investors are still focused on the outlook for demand that should be boosted by infrastructure spending.
Our concern remains that prices may have run ahead of the fundamentals and be vulnerable to a correction if equities turn from consolidating to weakness.

Gold has once again found support in the $1,850s per oz area, helped by the weaker dollar, but the yellow metal remains vulnerable.


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