BASE & PRECIOUS METALS - European Morning View - Sentiment improves

By: William Adams

London 19/11/2012 - Metals remained on a back footing- they started in Europe on Friday down an average of 0.2 percent, at the day’s highs they were up 0.2 percent, at the lows they were down an average of 1.6 percent and they ended down 0.6 percent. Precious metals were mixed gold was off 0.1 percent while the industrial precious metals were down an average of 0.8 percent. US industrial production data disappointed the market as did general nervousness about Greece and the US budget deficit negotiations.

This morning the markets are more upbeat as there seems to be some positive noise about the talks relating to the US fiscal cliff. Base metals are up an average of 0.4 percent with copper and nickel up 0.8 percent and the precious metals are up an average of 0.8 percent with gold up $10 to $1,723.70. Aluminium is the only metal in negative territory, it is down 0.2 percent at $1,950, while copper is up $60 at $7,775.

In Shanghai the February contracts are mixed, copper is bucking the trend with a 0.4 percent gain to Rmb 56,050, while the rest are down an average of 0.4 percent with lead down 0.5 percent at Rmb 15,390, zinc off 0.4 percent at Rmb 15,045 and aluminium off 0.3 percent at Rmb 15,390. The forward curve on copper remains in a contango.

Spot copper in Changjiang is up 0.3 percent at Rmb 55,850-56,150 which puts prices either side of the futures, while the LME/Shanghai arb window remains closed with the weaker yuan widening the differential.

Equities – are generally upbeat this morning, the Dow closed up 0.4 percent on Friday and this morning the Nikkei is up 1.4 percent, the Hang Seng is up 0.3 percent, the MSCI Asia Apex is up 0.5 percent, but Shanghai’s CSI 300 is off 0.1 percent.

Currencies – potential progress on US budget deficit talks has pulled the dollar back with the dollar index at 81.06, that is after a high of 81.45 on Friday. It is surprising how the dollar has reacted to concerns about the fiscal cliff, we would have expected the dollar to weaken on these concerns, but the fact it has climbed suggests the worry is not just about the fiscal cliff, but also incorporates the situation in the Middle East and Greece. The euro is last at 1.2770, after a low last week 1.2659, the pound is firmer at 1.5920, the aussie is last at 1.0375, the yen is at 81.35 and the yuan is weaker at 6.2360.

The economic calendar is focused on US housing today with US existing home sales and NAHB housing market index out at 3pm GMT. Ahead of that Bundesbank president Weidmann is speaking at 08:30 GMT.  

The base metals have generally held up well, some better than others, but having paused recently they look well placed to move higher again. Equities have been one of the main drags on sentiment of late, but if these react positively to the optimism over the fiscal cliff talks then that is likely to give metals a boost too. A move up above $7,715 on copper could start to look constructive. We still feel the benefits of increased infrastructure spending in China lie ahead and with the new leadership announced in China, sentiment may start to improve now. For bullion, it looks as though good underlying support has been found again.




Metals Overnight Performance
GMT7:17 AM+/-+/- %Lots
Steel 34500.0%Total lots
 Average (BM ex-Steel)0.4%5620
 Average PM0.8% 


Economic Agenda
EURGerman Buba President Weidmann Speaks
USDExisting Home Sales 4.76M4.75M
3:00pmUSDNAHB Housing Market Index 4141

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