Categories:
Base Metals
Topics:
General Base Metals
BASE METALS - European Opening View - Metals tread water, still looking for direction
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The base metals and markets in general put in a pre-relief rally yesterday in anticipation that the Greek government would scrape through with a vote on confidence. As a result, the dollar was under pressure for most of the day and that was enough to give the metals some lift – by the close they were up an average of 0.8 percent, with zinc leading the advance with a gain of 1.4 percent, while copper was up 0.4 percent at $9,043. We would not be surprised to see a bit more on the upside, but overall expect it will not be long before the markets are heading lower again either on the back of further EU debt concerns, or because of the general slowdown in the global economic outlook. Indeed the metals are down on average 0.3 percent this morning and there seems to have been little post-vote relief rally in the metals. Nickel is leading the decline with a 1.1 percent drop to $21,753, copper is down $16 at $9,027, aluminium is up $1 at $2,540 and lead is down 0.4 percent at $2,440. Volumes remain light with 1,629 lots of copper, 268 lots of aluminium traded and total volume of 2,351 lots, as of 07:20 BST. The dollar remains under pressure with the dollar index at 74.60, the euro is firmer at 1.4410, the aussie is last at 1.0600, sterling is last at 1.6244 and the yen is last at 80.30. So the stronger euro may well help underpin the commodities. Bullion is generally firm with gold last at $1,546 and silver at $36.39. Equities – the Dow closed up 0.9 percent, the Nikkei is up 1.8 percent, the Hang Seng is up 0.6 percent, the MSCI Asia Apex is up 0.7 percent, although China’s CSI 300 is little changed. The relief rally has, therefore, flowed through to most parts of Asia - so now all eyes will be on whether it flows through Western markets for a second day. In Shanghai the September metals are mixed with average gains of 0.1 percent. Zinc is up 0.5 percent at Rmb 17,245, aluminium is up 0.2 percent at Rmb 17,010, lead is up 0.1 percent at Rmb 16,730 and copper is down 0.1 percent at Rmb 67,550. Spot copper in Changjiang is 0.3 percent stronger at Rmb 68,650 - 68,920 so remains backwardated, while the LME/Shanghai copper arb remains negative, but has dropped back to the $150/tonne level from $200/tonne yesterday. The economic agenda contains data on the BoE meeting minutes, EU industrial orders and consumer confidence and then later the focus will switch to the FOMC statement and press conference. Although the Greek government won the vote of confidence the market is sceptical whether that will mean they can pass the austerity measures and more to the point whether the austerity measures are workable in the long run. So the EU debt problem may have stepped slightly off centre stage, but will remain firmly in the spotlight – we think. Our view on the metals is that they remain in consolidation mode within down trends and that rallies are likely to continue to attract selling. We may get more direction after today’s FOMC statement and press conference.
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