Market and product

The base metals ended mixed on Friday with copper and tin off one percent, while the rest were up an average of 0.7 percent and the precious metals saw palladium up 1.2 percent, while gold, silver and platinum were weaker with gold off 0.2 percent at $1,164. Given a cut in Chinese interest rates on Friday, we would have thought the metals would have been more upbeat as equities were with the Euro Stoxx 50 up 2.2 percent and the Dow closing up 0.9 percent.

This morning the base metals remain mixed with average losses of 0.2 percent, copper, zinc and tin are slightly firmer, while aluminium, nickel and lead are down around 0.5 percent. Volume has been light with 2,960 lots traded as of 06:07 GMT.

The precious metals are slightly firmer this morning with gold and silver up around 0.3 percent at $1,166.20 and $15.85, while the PGMs are little changed.

In Shanghai, the base metals are down an average of 0.5 percent, led by a 1.1 percent fall in copper to Rmb 39,050, aluminium is down one percent and the rest are little changed, with nickel slightly positive. In Changjiang, spot copper is down 1.1 percent at Rmb 39,050-39,200, the backwardation with the future contract is at an equivalent of some $23 per tonne, while the LME/Shanghai copper arb ratio is around parity at 7.52.

In other metals in China, gold is down 0.4 percent, silver is off 0.3 percent, steel rebar is up 0.2 percent and iron ore prices continue to drift, last at around $51.60.

Equities in Asia this morning are for the most part bullish with the Nikkei up 0.7 percent, the Hang Seng is little changed, the CSI 300 is up 0.8 percent, the Kospi is up 0.4 percent, although the ASX200 is off 0.1 percent.

Currencies – the dollar continued to push higher on Friday aided by the Chinese rate cut and the dollar index is last at 96.91, the euro is weak at 1.1034, as is sterling at 1.5325, the aussie is holding up well at 0.7250 and the yen is weak at 121.12. In emerging market currencies the yuan is weaker at 6.3904, the rouble is at 61.74, while the other currencies we follow on looking slightly weaker, but do not seem to be trending lower at the moment, so we see a bit of stability in the emerging markets, which should lend support for the metals.

The economic agenda is light today, the main focus is on German Ifo business climate and US new home sales, plus there is data on UK mortgage approvals, CBI industrial order expectations and Germany’s Bundesbank monthly report – see table below for more details.

The base metals are for the most part consolidating, the exception is aluminium that continues to look weak and where the downward trend dominates. Copper, lead and zinc still seem to be adjusting to the post-Glencore cutback rally, which suggests uncertainty, while nickel and tin seem to be trending higher. Copper could be building a “W”-shaped base, but it would take a move up above $5,315-$5,355 to confirm that. For now, we would expect more range trading. ILZSG data out today may through more light on the situations in lead and zinc.

The precious metals continue to consolidate in fairly high ground in what could be bullish flags. The rally in the gold price is now looking quite robust with prices zig-zagging higher with a series of higher highs and higher lows. We expect dips to remain supported.