Strong Chinese PPI data boosts metals prices

Jan 10, 2017 - 7:29 AM GMT
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The base metals have opened up on a strong footing this morning January 10, boosted by stronger than expected PPI data out of China – it was up 5.5%, compared with 3.3% in November, although CPI slipped to 2.1% from 2.3%. This has boosted base metals prices that are up 0.9% on average this morning, led by lead and zinc that are up 1.9% and 1.7% respectively, three-month copper prices are up 0.9% at $5,640 per tonne, nickel prices are up 0.5%, with aluminium up 0.2% and tin unchanged. Volume has been above average with 9,651 lots traded, as of 06:25 GMT.

Precious metals prices are firmer too this morning with average gains of 0.4%, with all the precious metals  closely bunched with gains of between 0.3% for PGM prices, silver prices are up 0.5% and spot gold prices are up 0.4% at $1,187.25 per oz.

This morning’s gains are built on the back of average gains of 0.8% on the base metals yesterday January 9, where lead and zinc prices once again led the gains, while copper prices struggled – they closed off 0.1%. Precious metals prices were also stronger yesterday, prices closed with average gains of 0.7%.

In Shanghai this morning, the base metals prices are up an average of 2.6%, with zinc and lead prices up 5% and 4.4%, respectively, nickel prices are up 2.1%, while the rest are up between 1.3% and 1.6%, with March copper price up 1.3% at Rmb 46,070 per tonne. Spot copper prices in Changjiang are up 0.5% at Rmb 45,520-45,720 per tonne. The forward curve remains in a contango.  The LME/Shanghai copper arb ratio is at 8.17.

In other metals in China, May iron ore prices have leapt 3.9% on the Dalian Commodity Exchange, on SHFE steel rebar is up 6.8% while gold and silver prices are up around 0.8%. In international markets, Brent crude oil prices are up 0.2% at $54.91 per barrel.

Equities pulled back yesterday January 9, with both the Euro Stoxx 50 and the Dow closing down around 0.4% – the 20,000 level on the Dow remains elusive – the high so far has been 19,999.63, it closed yesterday at 19,887.38. In Asia this morning, equities are mixed with the Nikkei off 0.8%, the Hang Seng is up 0.6%, the CSI 300 is up 0.1%, the ASX 200 is down 0.8%, which is up odd given the strength in metals, especially iron ore, while the Kospi is down 0.2%.

In FX, the dollar’s rebound early yesterday ran out of steam and the dollar index has pulled back to 101.82, after a high yesterday of 102.51. The weaker dollar has helped underpin other currencies with the euro at 1.0595, the yen at 115.72 and the aussie at 0.7363, although sterling remains weak at 1.2148. The yuan is above recent lows, it was recently quoted at 6.8765, and most emerging market currencies are firmer, especially the real is approaching high ground again.

The economic agenda has focused on Chinese inflation data – in addition, UK retail sales picked up, as did Japan’s consumer confidence – later there is data out on French industrial production, US NFIB small business index, US job openings and final wholesale inventories – see table below for more details.

The base metals are looking more bullish this morning and the strong PPI data in China is no doubt driving that – the metals look well placed to extend higher, the main concern is if and when markets turn risk-off ahead of Donal Trump’s inauguration.  With the inauguration ten days away there may still be a window of opportunity to establish a bullish trend before the markets look to consolidate. A weaker dollar will also help underpin metals prices. Given economic data we are bullish for metals – but political developments could scupper that – at least for a while.

The global inflationary implications of higher Chinese PPI may well help underpin gold prices, especially with the geopolitical uncertainty surrounding the inauguration and with more talk of a hard Brexit. In addition, if the markets start to fear inflation then other markets, such as equity and bond markets, may struggle and that could also prompt demand for safe-havens. 

 

Overnight Performance
GMT 06:25 +/- +/- % Lots
Cu 5640 50 0.9% 3152
Al 1726 4 0.2% 1634
Ni 10435 55 0.5% 1365
Zn 2725.5 45.5 1.7% 3088
Pb 2144 40.5 1.9% 412
Sn 21115 0 0.0% 0
  Average   0.9%         9,651
Gold 1187.25 5 0.4%  
Silver 16.64 0.075 0.5%  
Platinum 976 3 0.3%  
Palladium 759.9 1.9 0.3%  
  Average PM   0.4%  

 

SHFE Prices 06:28 GMT RMB Change % Change
Cu 46070 600 1.3%
AL  12830 205 1.6%
Zn 22540 1075 5.0%
Pb 18850 795 4.4%
Ni 87600 1770 2.1%
Sn 155210 2020 1.3%
Average change (base metals) 0   2.6%
Rebar 3160 200 6.8%
Iron ore 594 22.5 3.9%
Au 271.65 2.15 0.8%
Ag 4130 28 0.7%

 

Economic Agenda
GMT Country Data Actual Expected Previous
12:01am UK
BRC Retail Sales Monitor y/y
1.0%   0.6%
1:30am China
CPI y/y
2.1% 2.2% 2.3%
1:30am China
PPI y/y
5.5% 4.6% 3.3%
5:00am Japan
Consumer Confidence
43.1 41.3 40.9
 7:45am France
French Industrial Production m/m
  0.5% -0.2%
11:00am US 
NFIB Small Business Index
  99.6 98.4
3:00pm US
JOLTS Job Openings
  5.59M 5.53M
3:00pm US
Final Wholesale Inventories m/m
  0.9% 0.9%
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