Base metals prices were higher on the London Metal Exchange but mixed on the Shanghai Futures Exchange this morning, Thursday September 9, but equity markets in Asia-Pacific were weaker with participants once again nervous about possible central bank tapering.
* Market participants focused on whether the European Central Bank (ECB) will signal it is ready to start tapering – the ECB meets today
* Better-than-expected US job openings numbers once again open the way for a more hawkish Federal Reserve
Base metals
Three-month base metals prices on the LME were stronger with gains averaging 0.7% this morning, led by a 1.5% rise in nickel ($19,975 per tonne) and a 1.4% rise in aluminium ($2,830 per tonne), with both metals setting multi-month and multi-year highs respectively.
The rest of the metals were up by an average of 0.3%, with copper up by 0.2% at $9,288.50 per tonne.
The most-active base metals contracts on the SHFE were for the most part firmer, the exception was October copper that was down by 0.3% at 68,780 yuan ($10,642) per tonne, while the rest were up by an average of 1.9%, led by a 2.6% gain in October aluminium.
Precious metals
Precious metals were mildly weaker across the board, down by an average of 0.1%, with spot gold down by 0.1% at $1,787.79 per oz.
Wider markets
The yield on US 10-year treasuries has slipped and was recently at 1.33%, compared with 1.37% at a similar time on Wednesday. The potential for a more hawkish stance from the Federal Reserve seems to have raised risk-off sentiment.
Asia-Pacific equities were weaker this morning: the Nikkei (-0.67%), the Hang Seng (-2.06%), the CSI 300 (-0.8%), the Kospi (-1.4%) and the ASX 200 (-1.94%).
Currencies
The US Dollar Index rebounded on Tuesday and Wednesday and remains firm this morning, with the index at 92.74, compared with 92.57 level at a similar time on Wednesday.
With the dollar firmer, most of the major currencies are weaker: sterling (1.3757), the euro (1.1812) and the Australian dollar (0.7350), although the Japanese yen (110.14) is slightly firmer, which may also indicate some risk-off sentiment.
Key data
Today’s economic agenda is busy, especially on the central bank front. Data already out Thursday showed China consumer prices (CPI) climbed by 0.8% year on year in August, after a 1% rise in July, while producer prices (PPI) continued to climb, up by 9.5% year on year in August, after a 9% gain in July.
Later there is data on Germany’s trade balance, Japanese machine tool orders, China’s M2 money supply and new loans, US initial jobless claims, natural gas storage and crude oil inventories.
In addition, the ECB will update its monetary policy and hold a press conference and Federal Open Market Committee members Mary Daly, Charles Evans, Michelle Bowman and John Williams are scheduled to speak.
Thursday’s key themes and views
Aluminium is being driven higher by production concerns in China and bauxite supply concerns in Guinea, while nickel seems to be running higher on an accelerating fall in LME stocks and ahead of potential stainless steel production cuts, with the view producers will ramp up production before the cuts. Of the other metals, zinc seems to be holding up well, while the others look heavier.
With a lot of central bank commentary around tapering likely to be aired today, equity markets are expected to be nervous, and any pullback could weaken those metals that are not being driven higher by their own fundamentals.
Gold has run into resistance around the $1,834-per-oz level; the stronger dollar and expectations for some tapering news seem to be weighing on sentiment.