London 25/01/2013 -Despite some encouraging economic data yesterday in China, Europe and the US, the metals did not all respond well. Zinc, lead and tin climbed by an average of 0.7 percent, while copper, aluminium and nickel closed down an average of 0.5 percent. Precious metals closed down with average losses of 0.8 percent. The better economic data still seems to be spooking precious metals traders into thinking that the Fed will halt QE sooner rather than later. However, the fact that the good data did not lift copper is noteworthy – it suggests there is good supply above the $8,000 level.
That said, this morning the base metals are up an average of 0.8 percent so it looks as though Asia has reacted more positively to yesterday string of better data. Lead and zinc are up one percent, or more, while the rest are 0.7 percent higher, with copper at $8,131.
Precious metals are up an average of 0.4 percent with gold at $1,671.60, having been as low at $1,663.15 earlier this morning.
In Shanghai the April contracts on the base metals are on average up by 0.6 percent with zinc leading the way with a 1.1 percent rise to Rmb 15,635, lead is up 0.8 percent at Rmb 15,460, copper is up 0.4 percent at Rmb 58,640, while aluminium is unchanged at Rmb 15,225. Gold is unchanged at Rmb 340.31/g, while rebar is up 0.9 percent at Rmb 4,003.
Spot Changjiang copper is up 0.3 percent at Rmb 58,050-58,250, so remains in contango, while the LME/Shanghai arb window remains closed with the ratio at 7.22.
Equities – yesterday the Euro Stoxx 50 and Dow were up by 0.5 percent and 0.3 percent, but the picture in Asia is mixed with the Nikkei up 2.9 percent, while the rest are off with the Hang Seng down 0.3 percent, the MSCI Asia Apex off 1 percent and China’s CSI 300 off 0.4 percent.
Currencies – the euro is strong at 1.3410, the highest it has been since February 2012, the dollar index remains lacklustre at 79.85, the aussie is weaker at 1.0457, as are cable at 1.5788, the yen at 90.54, while the yuan is little changed at 6.2205.
The economic agenda is fairly light today with the German Ifo business climate index, UK GDP, UK index of services and in the US new home sales – see table attached.
Our outlook remains the same, we remain mildly bullish across the metals and yesterday’s good economic data supports our stance we feel. Although the better economic outlook may well make investors feel less in need of safe-havens, we feel currency weakness and potential for on further quantitative easing, whether it be in Japan, China, Europe or even the US, are likely to continue to make creditors nervous of currency debasement.
By: William Adams