BASE AND PRECIOUS METALS - European Morning View - Metals consolidate, but seem well placed to extend gains

By: William Adams

London 08/05/2013 - The metals had a mixed time yesterday, at the day’s highs they were on average up by around 0.5 percent, but at the lows the metals were off between 0.8 and 2.6 percent. The base metals closed down 0.3 percent on average, while the precious closed down 1.3 percent. Copper closed down 0.2 percent at $7,274, as the early consolidation attracted further buying interest, while gold closed down 1.4 percent at $1,449, having been down to $1,441.45 earlier in the day.

This morning the metals are little changed with the base metals mixed, copper is down 0.1 percent at $7,268.50, nickel is off 0.3 percent at $15,155 and aluminium is up 0.2 percent at $1,887.50, while the precious metals are up an average of 0.4 percent with gold and platinum 0.3 percent firmer at $1,453 and $1,483 respectively, silver is up 0.1 percent at $23.86 and palladium is up 0.7 percent at $682.80.

In Shanghai the metals are also little changed with copper off 0.4 percent at Rmb 52,680, zinc is down 0.1 percent at Rmb 14,575, lead is up 0.2 percent at Rmb 13,940 and aluminium is up 0.1 percent at Rmb 14,605. Gold and rebar are down 0.1 percent at Rmb 290.38/g and Rmb 3585.

In Changjiang spot copper is down 0.5 percent at Rmb 53,150-53,450 so remains backwardated to an equivalent of some $125/tonne, while the LME/Shanghai copper arb window is closed with the ratio around 7.24. China’s copper imports fell 27.2 percent year on year in April and were down 7.4 percent month on month. This is somewhat surprising as during April the LME arb window did open on occasions.

Equities are strong, yesterday the Euro Stoxx 50 climbed 0.7 percent and the Dow was up 0.6 percent to close above 15,000 for the first time ever. The strong flow has moved into Asia where the Nikkei is up 0.7 percent, the Hang Seng is up 0.6 percent, the Kospi is up 0.1 percent and China’s CSI 300 is up 0.5 percent.

Currencies are for the most part moving sideways with the dollar index at 82.18, the euro at 1.3100, the yen at 98.88 and the aussie at 1.0185, although sterling is a bit weaker at 1.5485 and the yuan continues to hit new highs, last at 6.1425.

China’s trade data out late yesterday showed a trade balance moved to an $18.2 billion surplus in April after a $0.9 billion deficit in March, with both imports and exports growing, although there are some questions over how accurate the data is as there was a 57.2 percent increase in shipments to Hong Kong that has raised some eyebrows. At face value the trade data looks encouraging, but as the copper import data showed, demand for copper imports has fallen, although that is not surprising as there are high levels of copper stocks in China.

 The economic calendar is fairly light today, data includes: UK HPI, German industrial production, US crude oil inventories and later this evening Chinese PPI and CPI. We also get FOMC member Stein and Treasury Secretary Lew speaking – see table attached for more details.

The pull back in the metals yesterday found underlying support and prices have got some lift, but consolidation seems to be the order of the day so far. The jury is out as to whether the precious metals are consolidating after rebounds seen in the second half of April, there is a danger that they could roll over to the downside, but so far seem to be holding up relatively well.

The base metals look more robust with prices looking well placed to build on Friday’s gains having had a breather yesterday. On balance we feel the base metals can continue higher as they unwind their recent oversold condition. We are not outright bullish, but feel prices can move up to range trade at higher levels again. In turn, this might pull up the industrial precious metals and overall, we feel bullion could see more short-covering emerge.     

Overnight Performance  
BST41402.3+/-+/- %Lots
Steel 21000.0%Total lots
 Average (BM ex-Steel)0.0%5596
 Average PM0.4% 


Economic Agenda
ChinaTrade Balance18.2B15.5B-0.9B
All Day
EU French Bank Holiday   
 3:00amUKHalifax HPI m/m 0.2%0.2%
6:00amEU German Industrial Production m/m-0.1%0.5%
8:30amUS FOMC Member Stein Speaks   
10:30amUS Crude Oil Inventories 2.1M6.7M
1:00pmUS 10-y Bond Auction  1.80|2.8
2:00pmUS Treasury Sec Lew Speaks   
9:30pmChinaCPI y/y 2.3%2.1%
9:30pmChinaPPI y/y -2.2%-1.9%