Base metals prices on the London Metal Exchange were upbeat on the morning of Friday March 25, although those trading on the Shanghai Futures Exchange gave a mixed performance as prices followed the pullbacks seen on the LME on Thursday.
Nickel on both exchanges remains the exception; the metal is still trading its own agenda while it adjusts to recent turmoil.
Flash manufacturing purchasing managers index (PMI) data stronger in US, weaker elsewhere.
Base metals
Three-month base metals prices on the LME, except for nickel that has not opened yet, were up by an average of 0.9% this morning. But this comes after some hefty pullbacks on Thursday that saw the base metals, excluding nickel, close down by an average of 2.3%, highlighting ongoing nervousness about recent volatility.
Volume traded on the LME remains low; 2,406 lots had traded by 6.11am London time, compared with 3,805 lots at a similar time on Thursday.
The most-traded contracts on the SHFE were split with the May contracts for tin, aluminium and copper down by 2.4%, 1.2% and 0.2% respectively, with the latter at 73,520 yuan ($11,536) per tonne. May zinc and lead were up by 0.4% and 0.5%, while April nickel was up by 14.3% at 267,970 yuan ($42,047) per tonne, which would imply an international price of around $37,260 per tonne.
Precious metals
Precious metals were also mixed this morning, with gold and palladium off by 0.2%, silver unchanged and platinum up by 0.6%. Gold was recently at $1,955.87 per oz and seems to be consolidating after Thursday’s 0.7% gain.
Wider markets
United States 10-year treasuries yields were consolidating this morning and were recently at 2.37%, compared with 2.34% at a similar time on Thursday.
Asia-Pacific equities were mixed this morning: the Hang Seng (-2.74%), China’s CSI 300 (-1.72%), the Kospi (+0.01%), the Nikkei (+0.14%) and the ASX 200 (+0.26%).
Currencies
The US Dollar Index was consolidating in high ground this morning and was recently at 98.58, compared with 98.83 and 98.42 at similar times on Thursday and Wednesday respectively.
With the dollar consolidating, so too are most of the other major currencies: the euro (1.1026), sterling (1.3200) and the Japanese yen’s (121.80), while the Australian dollar (0.7510) was challenging the highs from last October, supported by strong commodity prices.
Key data
Economic data already out showed the United Kingdom's Gfk consumer confidence dropped to -31 in March, from -26 in February, and retail sales dropped by 0.3% month on month in February, after a 1.9% gain in January.
Later there is data on German Ifo business climate, European Union M3 money supply and private loans, along with US data on revised University of Michigan consumer sentiment, inflation expectations and pending home sales.
In addition, the UK Financial Policy Committee will release meeting minutes and issue a statement, while US Federal Open Market Committee members John Williams and Christopher Waller are scheduled to speak.
Friday’s key themes and views
Despite nervous bouts of selling that seem to be tied into financing issues and potential for further lockdowns in China, interest in the base metals generally seems upbeat against the backdrop of China boosting growth, the inflation environment and as supply remains constrained. While these issues are likely to continue to provide support, the markets may start to get nervous about the potential for high energy prices to weigh on economic activity that would weaken the demand side of the equation. Thursday’s PMI manufacturing data across Europe started to show some slowdown in the rates of expansion.
Gold prices are also generally holding up well, with prices above where they were before March 7, when the latest bout of volatility in the metals markets kicked-off. Money coming out of bonds may well be looking for a more commodity-based haven, although rising bond yields, a stronger dollar and risk-on in other markets may remain headwinds.