Global markets stabilized on the morning of Tuesday June 26 amid easing trade tensions, while three-month base metals prices on the London Metal Exchange have begun to consolidate after their weakness on Monday.
Copper, nickel and zinc were all up by 0.2%, lead was unchanged, while aluminium and lead were the stragglers – down by 0.1% and 0.3% respectively. On an average basis, the base metals were unchanged this morning, in contrast to the 1.5% decline logged on Monday.
Volume was below average with 5,494 lots traded as at 6.09am London time.
In the precious metals, gold, silver and platinum prices were struggling with losses of 0.3%, 0.2% and 0.2% respectively. The looming death cross in gold’s technical chart does not bode well for the yellow metal as the 50-daily moving average (DMA) crossed below the 200-DMA this morning. Only palladium managed to eke out a gain of 0.3% to $944.70 per oz due its more industrial background.
In China, base metals prices on the Shanghai Futures Exchange were weak. The most-traded September nickel contract led the decline, down by 2%, followed by August aluminium and August zinc, with declines of 1.1%, while August copper and September tin were both down by 0.7%. The July lead contract was an exception to the broad-based weakness with a small gain of 0.3% to 19,720 yuan ($3,031) per tonne. On average, the SHFE base metals complex was down by 0.9%.
In other metals in China, the most-traded October steel rebar contract on the SHFE was down by 1.6%, while the SHFE December gold and silver contracts were little changed. The most-traded iron ore contract on Dalian Commodity Exchange was down 0.6% to 461.50 yuan per tonne.
Spot copper prices in Changjiang were down 1.1% at 51,050-51,190 yuan per tonne and the LME/Shanghai copper arbitrage ratio stood at 7.57 this morning.
The dollar index continues to retreat, down 0.1% and was recently trading at 94.27. This has allowed sterling, the euro and the Australian dollar to stabilize, but the yen at 109.68 suggests that risk-averse investors are still actively diversifying away from risk assets.
Emerging market currencies extended their gains this morning on the back of the weaker dollar index. The Indonesian rupiah saw the biggest move, up by 0.3% at 14,148, while the Chinese yuan and Malaysian ringgit secured a 0.2% gain each.
The global equity market was a sea of red following the sell-off in the western market, where in the United States the Dow Jones closed down by 1.33% to 24,252.80 and its European counterpart struggled too, with Euro Stoxx 50 closing down 2.1% at 3,369.
Asian equities showed some signs of stabilizing this morning, but most remained under pressure; the Nikkei (+0.02%), Topix Index (+0.16%) logged marginal gains, but there was weakness in the Hang Seng Index (-0.28%), CSI 300 (-1.22%) and ASX 200 index (-0.21%).
In data on Monday, US new home sales in May beat estimates at 689,000 compared with a forecast print of 665,000.
Data this morning showed the Bank of Japan’s core consumer price index (CPI) number was slightly below expectations at 0.5%, against an expected reading of 0.6%. Later, markets will turn their focus to the US’ Conference Board consumer confidence and Richmond manufacturing index.
In addition, Bank of England Monetary Policy Committee (MPC) members Jonathan Haskel and Ian McCafferty and US Federal Open Market Committee (FOMC) member Raphael Bostic are also due to speak today.
Ongoing trade spats – driven primarily by the US – continue to fuel fear and uncertainty, leading to sell-offs in global equity markets. US President Donald Trump raised his protectionist stance against China and the European Union, slapping fresh tariffs on both and considering the imposition of additional ones, leading to a further deterioration in trade relations.
The base metals are generally under pressure due to escalating trade tensions between the US and its key trading allies. All metals have struggled to sustain the upside momentum since the rally in early June, with most giving up the gains they had made earlier in the month.
Copper is trading below $7,000 per tonne again, aluminium continues to shed the gains earned during its Rusal sanction-inspired rally, while zinc is battling its own negative fundamental backdrop and fresh Indonesian exports are weighing on tin prices. Nickel and lead are holding up better than the other base metals, but these two are being dragged lower as fear and uncertainty continue dominate the complex.
Perhaps it will now take more than just better economic data from the US and China to inspire fresh confidence in the base metals complex. However, considering how some metals are merely consolidating from recent gains, dips may remain attractive in the likes of copper, nickel, lead and tin.
Despite the challenging macroeconomic backdrop, the rest of the precious metals seem to be following gold’s lead and further downside cannot be ruled out in the short term.
This article was first published by FastMarkets as the Metals Morning View.
Andy Farida
FastMarkets