15/03/2016 11:01 AST
The base metals have started to look tired and most metals eased yesterday, the exception was tin that held steady with a 0.7 percent gain to $16,885, copper was little changed at $4,954.50, while the others were down by an average of one percent. Precious metals were also weaker, they closed down an average of 0.7 percent, with gold prices closing at $1,236.
This morning the base metals are mixed, copper is off 0.6 percent at $4,925, nickel is up 0.5 percent, tin is off 0.2 percent, while the rest are little changed. Volume has been low with 3,480 lots traded as of 06:00 GMT. The precious metals are down again this morning, down an average of 0.4 percent, with gold and silver prices off around 0.5 percent, while the PGMs are slightly softer. The gold price is last at $1,228.20 having been as low at $1,226.
In Shanghai, the base metals are down across the board by an average of one percent, copper is off 1.2 percent at Rmb 37,300, spot copper in Changjiang is down 1.6 percent at Rmb 36,900-37,100, the copper spread is at an equivalent of $30 per tonne contango and the LME/Shanghai copper arb ratio is at 7.57, which means the arb window is closed.
In other markets in China, gold prices are down 2.5 percent, silver is down 2.1 percent, steel rebar is off 2.2 percent, iron ore prices are correcting, last around $56.90 after a high of $63.70 last week. In other markets, Brent crude prices are down 1.3 percent at $39.12.
Equities remained upbeat yesterday with the Euro Stoxx 50 closing up 0.6 percent and the Dow closed up 0.1 percent suggesting risk appetite was still on, but Asia seems less sure, with the Nikkei off 0.7 percent, the Bank of Japan did not tweak its monetary policy, the Hang Seng is off 0.5 percent, the CSI 300 is down 0.9 percent, the Kospi is down 0.1 percent and the ASX200 is off 1.4 percent.
In FX, the dollar index is edging higher, no surprise there given the FOMC meeting starts today and reports tomorrow, the dollar index is last at 96.58, the euro is treading water at 1.1102, sterling is easier at 1.4268, as is euro-sterling at 0.7780, the aussie is drifting after its recent show of strength, last at 0.7490 and the yen is still trading sideways, last at 113.34.
In emerging market (EM) currencies the yuan is slightly weaker at 6.5010, the rouble is climbing, last at 70.00 and the other EM currencies we follow are giving back some of the gains seen in recent weeks.
The economic agenda is busy, Japan’s revised industrial production held at 3.7 percent, tertiary industry activity climbed 1.5 percent, data out later includes French CPI, EU employment change, US retail sales, PPI, Empire State manufacturing, business inventories, NAHB housing market index and TIC long term purchases – see table below for more details.
With oil and iron ore prices retreating, perhaps the commodity bull-run has run its course, at least for now. We have seen the rallies as counter trend moves so should not be surprised to see them end, especially given the far from optimistic global economic outlook. For now equities and EM currencies still point to risk-on, so we will need to see whether that continues. The base metals prices have been consolidating in recent days, so we wait to see if they tip lower, so far aluminium seems to have done so and nickel may have done so too. For now, we expect at least consolidation and would be wary in case that turns into a correction. Any further weakness in oil, or strength in the dollar, may well tip the balance.
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