BASE & PRECIOUS METALS - European Morning View - Markets boosted by stronger Chinese data

By: William Adams

London 10/01/2013 -Metals tried higher on Wednesday, at the day’s highs average gains were around 1.5 percent across the base and precious metals, although gains were once again difficult to hold on to with base metals closing up by an average of 0.4 percent and precious metals closed up an average of 0.5 percent, with gold off 0.3 percent at $1,655.80 while the PGMs did better – with palladium up 2.1 percent and platinum closed up 0.7 percent as unrest in South Africa’s mining and farming industries picked-up again.

This morning markets are stronger as better than expected Chinese trade data that saw the trade balance rise to 31.6 billion, up from 19.6 billion, and a pick-up in the broad measure of financing, which includes bank and non-bank lending, climbed to 1.63 trillion yuan from 1.27 trillion yuan a year earlier. Local currency loans, however, fell to 454 billion yuan from 523 billion yuan, which highlights the growth in other types of financing, such as the financial use of metals where metals are imported under letters of credit and used as collateral against loans.

The base metals are up this morning by an average of 1.1 percent and the precious are up an average of 0.9 percent. The rise across the base is fairly uniform with gains of between 1 and 1.2 percent, with copper last at $8,144, while the precious metals are up between 0.2 percent for gold at $1,658.90 and 1.9 percent for palladium at $697.30 – see table attached for more details.

In Shanghai the March base metals contracts are up an average of 0.5 percent, copper leads the way with a 0.7 percent gain to Rmb 58,540, lead and zinc are up 0.5 percent at Rmb 15,340 and Rmb 15,415 and aluminium is up 0.1 percent at Rmb 15,270. Rebar is up 0.5 percent too at Rmb 3,916, while gold is little changed at Rmb 334.87.

Spot copper in Changjiang is up 0.2 percent at Rmb 57,550-57,750, which puts it in contango with the futures, while the LME/Shanghai arb window is closed.

Equities – yesterday saw positive performances on the euro Stoxx 50 and Dow with gains of around 0.5 percent and the Chinese data has lifted sentiment in Asia where the Nikkei and Hang Seng are up 0. 7 percent, the MSCI Asia Apex is up 0.9 percent and China’s CSI 300 is up 0.2 percent.

The dollar is holding up relatively well with the dollar index at 80.55, the euro is last at 1.3068, cable is slightly weaker at 1.6025, the aussie is stronger at 1.0565, the yuan is firm at 6.2260 and the yen has weakened again to 88.30.

The economic agenda is busy, in addition to the data out in Asia, we have French industrial production and CPI, UK asset purchase facility and the Bank of England and ECB rate decisions. US data includes initial jobless claims and wholesale inventories, plus FOMC members George and Bullard are speaking – see table attached for more details.

Our short term view remain mildly bullish, we have been looking for scale down support as we feel the medium term outlooks have improved for the recoveries in China and the US to gain momentum and today's Chinese trade data supports that view. The PGMs also look set to lead bullion higher too.   


Metals Overnight Performance
GMT7:35 AM+/-+/- %Lots
Steel 36500.0%Total lots
 Average (BM ex-Steel)1.1%5940
 Average PM0.9% 



Economic Agenda
CNYNew Loans454B550B523B
12:30amCNYM2 Money Supply y/y13.8%14.1%13.9%
2:00amCNYTrade Balance31.6B20.1B19.6B
5:00amJPYLeading Indicators91.9%93.1%92.8%
 7:45amEURFrench Industrial Production m/m0.2%-0.7%
7:45amEURFrench CPI m/m 0.4%-0.2%
12:00pmGBPAsset Purchase Facility 375B375B
12:00pmGBPOfficial Bank Rate 0.5%0.5%
TentativeGBPMPC Rate Statement   
12:45pmEURMinimum Bid Rate 0.8%0.8%
1:30pmEURECB Press Conference   
1:30pmUSDUnemployment Claims 361K372K
3:00pmUSDWholesale Inventories m/m 0.2%0.6%
3:30pmUSDNatural Gas Storage -185B-135B
6:00pmUSD30-y Bond Auction  2.92|2.5
6:10pmUSDFOMC Member George Speaks   
7:00pmUSDFOMC Member Bullard Speaks   
11:50pmJPYCurrent Account 0.31T0.41T
11:50pmJPYBank Lending y/y  1.0%