Base metals prices on the London Metal Exchange and Shanghai Futures Exchange were generally weaker on the morning of Wednesday September 1, in the face of further evidence of a slowdown in manufacturing activity.
* Chicago’s manufacturing purchasing managers' index (PMI) fell to 66.8 in August from 73.4 in July
* China’s Caixin manufacturing PMI also showed contraction with a fall to 49.2 in August, from 50.3 in July
* There is a barrage of economic data out later on Wednesday to provide further insight into the global economy
Base metals
Three-month base metals prices on the LME were mixed but down overall; aluminium ($2,710 per tonne) and lead ($2,262 per tonne) were bucking the trend with small gains of 0.1% and 0.2% respectively, while the rest of the complex were down by an average of 0.6%, with copper down by 1% at $9,436 per tonne.
The most-active base metals contracts on the SHFE were mainly lower, the exception was October nickel that was up by 0.5%, while the rest were down by an average of 0.7%. The October contracts for aluminium, lead and copper were all down by 0.9%, with the latter at 69,550 yuan ($10,759) per tonne, and October zinc and October tin were down by 0.6% and 0.4% respectively.
Precious metals
Spot gold and silver prices were little changed with gold up by 0.1% at $1,815.63 per oz and silver down by 0.1% at $23.85 per oz. Platinum and palladium were also mixed, with platinum down by 0.2% at $1,011.40 per oz and palladium up by 0.4% at $2,474 per oz.
Wider markets
The yield on US 10-year treasuries has picked up to 1.32%, up from 1.28%, at a similar time on Tuesday.
Asia-Pacific equities were mainly firmer this morning: the Nikkei (+1.29%), the Hang Seng (+0.63%), CSI 300 (+1.21%) and the Kospi (+0.29%), while the ASX 200 (-0.1%) bucked the trend.
Currencies
The US dollar index ran into support on Tuesday at 92.40 and was recently quoted at 92.74.
The firmer dollar has led to some weakness in the major currencies so far on Wednesday: sterling (1.3750), the Japanese yen (110.20) and the euro (1.1798), although the Australian dollar (0.7331) has held up better.
Key data
Data already out showed Japan’s capital spending climbed by 5.3% in June, after a 7.8% fall in May and its manufacturing PMI in August was 52.7, after being at 53 in July. German retail sales fell by 5.1% in July after a 4.2% rise in June.
Later there is PMI data out across Europe and the United States, as well as data on the European Union and Italian unemployment rates and US data on the ADP non-farm employment change, construction spending, ISM manufacturing prices, total vehicles sales and crude oil inventories.
In addition, Bundesbank president Jens Weidmann and Federal Open Market Committee member Raphael Bostic are scheduled to speak and there are Organization of Petroleum Exporting Countries/ Joint Ministerial Monitoring Committee meetings.
Wednesday’s key themes and views
The show of strength that started to get underway in most of the base metals around August 19, is showing signs of waning this morning, although zinc and lead have shown some weakness for a few days now.
With the summer holiday season now ending in the northern hemisphere and industrial activity set to pick up accordingly, we should get to see if consumers are ready to restock, or will the manufacturing slowdown, as seen by the PMI data already out, mean consumers are in no hurry to restock?
Another question is that if consumers want to restock, will there be the supplies available given the logistical delays so many supply chains have been facing. On balance, in this climate we expect consumers will want to run with more stock and as such we remain generally bullish.
Gold prices have recovered well from the early August downward spike and look well placed to push higher.