LME base metals prices and spot precious metals were up across the board on news of Russia's invasion of Ukraine, while base metals on the SHFE were mixed on the morning of Thursday February 24.
* Nickel, aluminium, palladium and silver were up by more than 2% this morning
* Spot Brent crude oil touches $100 per barrel
* Western equity index futures down 2-4%
Base metals
Three-month base metals prices on the London Metal Exchange were up by an average of 1%, led by 2.5% gains in both aluminium ($3,377 per tonne) and nickel ($25,105 per tonne), while zinc was up by 0.6% ($3,598 per tonne) and copper up 0.2% ($9,863 per tonne). The rest were little changed.
The most-traded contracts on the Shanghai Futures Exchange were mixed. April nickel was up the most with a 1.2% gain, April aluminium was up by 0.3% and May tin was up by 1.9%, while April zinc was down 1.6%, April lead off by 0.1% and April copper was down by 0.5% at 70,970 yuan ($11,232) per tonne. For now, metals in Shanghai seem to be trading their own fundamentals rather than being over influenced by events in Europe.
Precious metals
Not surprisingly, spot gold and silver were up on growing haven demand and inflationary concerns, while the platinum group metals were also up on haven demand and on concerns that supplies from Russia are likely to be disrupted. The metals were up between 1.6% for gold ($1,941.20 per oz) and 2.9% for palladium ($2,551.50 per oz).
Wider markets
Haven demand has seen the yield on United States 10-year treasuries slip to 1.9%, it was at 1.98% at a similar time on Wednesday.
Asia-Pacific equities were weaker across the board on Thursday: the Hang Seng (-3.53%), the Nikkei (-1.81%), China’s CSI 300 (-2.03%), the Kospi (-2.6%) and the ASX 200 (-2.98%).
Currencies
The US Dollar Index jumped higher on Thursday morning and was recently at 96.60, up from 95.96 at a similar time on Wednesday.
The other major currencies were mostly weaker: the euro (1.1246), sterling (1.3482) and the Australian dollar (0.7184), while the Japanese yen (114.61) was firmer, again on haven interest.
Key data
Economic data out on Thursday includes United Kingdom realised sales from the Confederation of British Industry, China’s leading indicators and US data on gross domestic product, initial jobless claims,new home sales, natural gas storage and crude oil inventories.
In addition, Bank of England governor Andrew Bailey, UK Monetary Policy Committee member Huw Pill and Federal Open Market Committee member Loretta Mester are scheduled to speak.
Thursday’s key themes and views
We said in Wednesday’s report that “there seems a certain sense of calm - is this the calm before the storm?” It turned out to be the case - base and platinum group metals are reacting this morning to the increased likelihood that commodity trading will be disrupted and base metals prices are also being boosted as higher energy prices are likely to further affect productions costs. Prices have already been high because of the risk of this happening, so some of the risk is already priced in, but how much further prices rise and how long they stay there is uncertain at the moment, and we will need to wait and see how the crisis unfolds.
This is almost a win-win situation for gold, however, given the increase in haven demand, raised inflation pressures and a development that may well mean central banks cannot be as hawkish as they want to be. Palladium is the most at risk given that around 38% of global mine output comes from Russia.