MORNING VIEW: LME base metals prices remain mixed, path of least resistance sideways to lower

While Wall Street climbs to record highs on optimism for a United States-China trade deal and on merger and acquisition developments, the metals at best tread water, while some head lower.

Asian equities mainly stronger led by a 0.83% rise in the Australian ASX 200 index.Gold and yen trending lower, but US government bond yields are weaker - so a mixed picture for the havens.
Base metals
Three-month base metals prices on the London Metal Exchange were mixed, albeit little changed, this morning, Tuesday November 26. While most metals are treading water, lead pushed lower to reach $1,930 per tonne, a level not seen since July. Zinc continues to fall, but is holding above October's low, while the rest are consolidating either below recent highs or above recent lows. Copper was off by 0.1% at $5,866.50 per tonne, its recent range being $5,800 -$6,011 per tonne.

Trading volume has been below average with 3,580 lots traded as at 6.25am London time.

In China, the most-traded base metals contracts on the Shanghai Futures Exchange were down across the board on Tuesday; January lead dropped by the most with a drop of 1.4%, while the rest of the complex was off by an average of 0.3%. Within that, January copper was holding up the best at 47,060 yuan ($6,688) per tonne, down by just 10 yuan per tonne from its close on Monday.

The spot copper price in Changjiang was down by 0.1% at 47,070-47,150 yuan per tonne and the LME/Shanghai copper arbitrage ratio dipped to 8.02, compared with 8.03 at a similar time on Monday.

Precious metals
The precious metals are firmer this morning with spot gold and silver up by 0.2% and 0.5% respectively, with gold recently quoted at $1,456.76 per oz, while platinum and palladium were up by 0.8% and 0.7% respectively. While gold is firmer this morning, is it generally under pressure and at risk of testing support around $1,455 per oz.

Wider markets
The spot Brent crude oil price was little changed, up by 0.06% to $63.58 per barrel, the overall price trend is upward, with the price now up by 13.3% from the early-October low at $56.13 per barrel.

The yield on benchmark US 10-year treasuries has eased and was recently quoted at 1.7596%, compared with around 1.7805% at a similar time on Monday morning. The German 10-year bund yield was, however, slightly firmer and was recently quoted at -0.3480%, compared with -0.3550% at a similar time on Monday.

Asian equities were mixed this morning: the Nikkei (+0.35%), the Kospi (-0.10%), the Hang Seng (-0.22%), China's CSI 300 (+0.35%) and the ASX 200 (+0.83%).

This follows a stronger performance in Western markets on Monday, where in the US, the Dow Jones Industrial Average closed up by 0.68% at 28,066.47, and in Europe, where the Euro Stoxx50 closed up by 0.55% at 3,707.68.

Currencies
The dollar index is consolidating in high ground and was recently quoted at 98.32. The index has been choppy since early November and has been within a 97.16-to-98.45 range.

Most of the other major currencies we follow are also consolidating in recent low ground: the euro (1.1015), the Australian dollar (0.6781) and the yen (108.97), while sterling (1.2886) is consolidating in fairly high ground.

The yuan, at 7.0323, is little changed from Monday.

Key data
Data out earlier on Tuesday showed Japan's consumer price index remained unchanged at 0.3% and German Gfk consumer climate reading edge higher to 9.7 in November from 9.6 in October - the data series has been oscillating sideways since June, having fallen from around the 11 level in early 2018.

Data out later includes data on United Kingdom high street lending with US data that includes goods trade balance, wholesale inventories, two readings on house prices, consumer confidence, the Richmond manufacturing index and new home sales.

In addition, US Federal Open Market Committee member Lael Brainard is speaking.

Today's key themes and views
Trade talk fatigue has for a long time capped those base metals that are not reacting to particular fundamentals news and developments and where bullish fundamentals news has run its course as in nickel, lead and zinc, the long liquidation is now weighing on prices. For the rest of the metals, bases seem to be in place, but there is not enough concrete news on a trade deal to instill enough confidence in consumers to make them want to restock.

Gold has been trending lower in recent days and that, combined with record setting US equites, suggests sentiment is becoming more risk-on - we wait to see if this starts to positively impact the base metals, but we expect it will take a trade deal to do that.

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