Base metals prices on the London Metal Exchange were mainly firmer on the morning of Tuesday August 31, while those on the Shanghai Futures Exchange were more mixed.
This comes despite the release of some weaker than expected Chinese manufacturing numbers. The US Dollar Index was, however, weaker.
* China’s manufacturing purchasing managers index (PMI) fell to 50.1 in August, after registering 50.4 in July.
* China’s services PMI slumped to 47.5 in August, after a reading of 53.3 in July.
Base metals
The LME three-month lead ($2,276.50 per tonne) price was down by 0.4% this morning, while the rest of the complex was up by an average of 1.6% – considering the Chinese PMI numbers this is highly surprising. Aluminium ($2,710.50 per tonne) led to upside with a 2.1% gain, while copper ($9,501 per tonne) was up by 0.9%.
Volumes on the LME were high with 14,696 lots traded by 6.42 am London time – a more normal volume at a similar time is around 6,000 lots.
The most-active base metals contracts on the SHFE were more mixed on Tuesday, with the October lead and zinc contracts down by 1.6% and 0.6% respectively, but the rest were up by an average of 1.8% – led by a 3.4% gain in October nickel. October copper was up by 0.5% at 70,030 yuan ($10,823) per tonne.
Precious metals
The more industrial spot precious metals prices were stronger this morning with silver ($24.19 per oz) and platinum ($1,017.80 per oz) up by 0.8% and 0.7% respectively and palladium ($2,491.40 per oz) up by 3.2%, while gold was little changed at $1,817.06 per oz.
Wider markets
The yield on US 10-year treasuries was recently at 1.28%, down from 1.34% at a similar time on Friday.
Asia-Pacific equities were mainly firmer this morning: the Nikkei (+1.08%), the ASX 200 (+0.4%), the Hang Seng (+0.21%) and the Kospi (+1.57%), while the CSI 300 (-0.12%) bucked the trend.
Currencies
The US Dollar Index started to weaken after US Federal Reserve chair Jerome Powell’s speech last Friday, and was recently quoted at 92.47, down from a 92.94 at a similar time on Friday.
The major currencies were mainly firmer on Tuesday: sterling (1.3798), the Japanese yen (109.84), the euro (1.1829) and the Australian dollar (0.7339).
Key data
Today’s economic agenda is busy. In addition to the Chinese PMI numbers already mentioned, there has been a raft of data out of Japan that showed the unemployment rate dipped to 2.8% in August, from 2.9% in July, preliminary industrial production fell by 1.5% month on month in July, after a 6.5% rise in June, consumer confidence came in at 36.7 in August, from 37.5 previously, and housing starts climbed 9.9% in July, after a 7.35 rise in June.
Later there is data on French consumer spending, consumer prices (CPI) and gross domestic product (GDP), the German unemployment change, UK lending, EU and Italian CPI and US releases including house price data, the Chicago PMI and consumer confidence.
Tuesday’s key themes and views
With the Jackson Hole meeting out of the way and not rocking the boat, market participants seem once again to be reassured that Powell has his hands firmly on the tiller and seem confident he can control the exit with causing fireworks. And, the markets seem to be liking it, especially because they have so far been able to avoid reacting negatively to the weak Chinese PMI data.
But there are fundamental reasons underpinning some of the metals too; aluminium production is being constrained in China due to power rationing, there is a deepening drought in Chile and infrastructure projects are underway while governments reflate their economies.
Gold’s recovery from the early August downward spike puts it in a good position to head higher and the non-hawkish output from Jackson Hole, combined with the weaker dollar have become a slight tailwind.