Statistics

METALS MORNING VIEW – Asian equities rallied, that may reduce fear in the industrial metals

Date Aug 27 2015 09:04:56
Aug.27,2015(SHMET)--

 

The base metals were boosted by China’s interest rate and reserve requirement ratio cuts, which led to average gains of 1.1 percent, led by a 2.1 percent rise in copper to $5,056 – the recovery in confidence led to a strong rebound in equity market, at least initially, but this weighed on bullion prices that saw gold and silver fall 0.7 percent, platinum off 0.5 percent and palladium drop 5.3 percent.

 

This morning, despite a more bullish market in Asia, albeit a volatile one in China, the base metals are off an average of 0.2 percent, led by 0.7 percent falls in copper ($5,022) and zinc, aluminium is off 0.6 percent, lead is off 0.2 percent, while nickel is up 0.2 percent and tin is up 0.7 percent. Volume is stronger at 6,898 lots, indeed it has been stronger all week.

 

Precious metals are mixed, with bullion off around 0.6 percent with gold at $1,136, the PGMs are firmer with platinum up 0.5 percent at $981.90, while palladium is up 2.1 percent at $547, having fallen heavily yesterday.

 

In Shanghai, the base metals are for the most part firmer with average gains of 0.6 percent – nickel is the only metal that is lower today, it is down 0.3 percent, while copper is up 1.7 percent at Rmb 39,200 – copper was by far the strongest metal yesterday too, which again suggests the SRB may be in the market. Spot copper is up 0.5 percent at Rmb 39,250-39,400, the backwardation with the October futures is at an equivalent of $30 per tonne, while the LME/Shanghai arb window is open with the arb ratio at 7.83.

 

Precious metals are weaker in Shanghai with gold off 1.8 percent and silver down 1.2 percent – in other metals, steel rebar is up 0.5 percent and iron ore is steady at $53.45.

 

Equities had a volatile day yesterday – China’s rate cut gave markets a boost that saw the Euro Stoxx 50 close up 4.7 percen, but the Dow was up 2.7 percent at one stage, but then closed down 1.3 percent. In Asia, the tone is firmer again with the CSI 300 up 3.2 percent, the Nikkei is up 2.8 percent, the Hang Seng is up 0.3 percent, the Kospi is up 2.6 percent and the Australian ASX200 is up 0.6 percent. So if the equities have found a footing then that might calm the fears in the base metals, at least for a while, and in turn that could see some bargain hunting emerge – key then will be whether that leads to short-covering.

 

Currencies – the change in recent trends seems to be affecting the currencies too with the dollar rebounding, last at 94.21 after a low on Monday of 92.56, the euro is holding below recent highs, last at 1.1487, as is sterling at 1.5705, the yen is at 119.45, the rouble is at 68.92, but the aussie remains weak at 0.7116. The yuan is last at 6.4852 after a low yesterday of 6.5050, while the other emerging market currencies remain weak.

 

Economic data shows Japan’s Services PPI is firmer at 0.6 percent, later we get UK mortgage approvals, CBI realised sales and US data includes durable goods, crude oil inventories and FOMC member William Dudley is speaking at 1:30 BST.

 

This morning the base metals are consolidating yesterday’s gains, the downward trends dominate and the rebounds are fragile, but if some stability returns to the broader markets then there may be some relief rallies in the base metals. Much will then depend on whether short-covering gains momentum. Yesterday’s LME COTR data showed some short-covering, but it tended to go hand-in-hand with long liquidation so there was selling and buying, but if fear dies down then the short-covering could dominate for a while.

 

Gold rallied on safe-haven buying, if the tide has turned in the other markets then gold is likely to pull back to consolidate. With emerging market currencies still weak and in fear of further devaluation then interest in gold may not fade too much. The more industrial precious metals are also likely to benefit should markets become less fearful.

 

 

 

Overnight Performance                

BST       06:41:31       +/-   +/- %     Lots

Cu  5022      -34  -0.7%     3728

Al    1547      -9    -0.6%     1342

Ni    9585      20   0.2%      657

Zn   1725.5   -12.5      -0.7%     999

Pb   1670      -3.5 -0.2%     162

Sn   14200    100 0.7%      10

Steel     300 0     0.0%      Total

      Average (BM ex-Steel)      -0.2%     6898

Gold       1136      -7.4 -0.6%    

Silver     14.58     -0.1 -0.7%    

Platinum       981.9     4.9  0.5%     

Palladium     547 11   2.1%     

      Average PM       0.3%     

 

 

SHFE Prices 6:45 BST          Change % Change

Cu  39200    650 1.7%

AL 11860    -5    0.0%

Zn   14475    85   0.6%

Pb   13245    165 1.3%

Ni    74940    -250       -0.3%

Sn   101150  310 0.3%

Average change (base metals)      236.5          0.6%

Rebar    1951      10   0.5%

Au   237.1     -4.25      -1.8%

Ag   3361      -41  -1.2%

 

 

Economic Agenda

BST       Country Data      ACTUAL       Expected      Previous

12:50am       JPY SPPI y/y       0.6%      0.4%      0.4%

 9:30am       GBP      BBA Mortgage Approvals       46.0K     44.5K

11:00am       GBP      CBI Realized Sales         19   21

1:30pm  USD      Core Durable Goods Orders m/m       0.3%      0.6%

1:30pm  USD      Durable Goods Orders m/m         -0.4%     3.4%

3:00pm  USD      FOMC Member Dudley Speaks                  

3:30pm  USD      Crude Oil Inventories      1.0M      2.6M

 

 

Edited by SHMET

GOLD PRICES RALLY AS CONCERNS ABOUT FALLOUT FROM CHINA’S DEVALUATION ESCALATE

Date Aug 24 2015 09:19:05
Aug.24,2015(SHMET)--

Precious metals were stronger yesterday with average gains of two percent with gold prices up 1.9 percent and the others up between 1.7 and 2.2 percent – concerns about China and emerging markets causing contagion in broader markets seems to have refocused investors’ interest in bullion.

 

The base metals were mixed yesterday, closing with average gains of 0.4 percent, copper led on the upside with a 1.7 percent gain to $5,090, aluminium, zinc and lead were firmer, while nickel and tin were down an average of 0.9 percent.

 

This morning the gold prices are leading the way on the upside with a 0.8 percent gain to $1,164.40, the rest are up between 0.4 and 0.7 percent.

 

Base metals are mixed this morning, but generally little changed with copper off 0.2 percent at $5,077.50, the rest are up between 0.1 and 0.3 percent. Volume has been average with 3,883 lots traded as of 06:05 BST – so far this week volume at this time of day has averaged 3,212 lots, down from an average of 10,523 lots last week, so the markets do seem to have settled down after the post-Chinese devaluation gyrations.

 

In China, the base metals are for the most part firmer by an average of 0.6 percent with copper up the most with a 1.1 percent gain to Rmb 38,990, while nickel and tin are negative, with tin down 1.2 percent and nickel off 0.4 percent. The latter two may be off as China has forced some heavy industry to halt production to clean the air around Beijing, this is especially affecting the steel industry, which could be impacting the stainless steel and tin-plating industries.

 

Spot copper in Changjiang is up 0.9 percent at Rmb 39,100-39,200, the backwardation with the October contracts is at an equivalent of $32 per tonne and the LME/Shanghai copper arb ratio is at 7.77, which means the arb window is open – this finally seems to be underpinning copper, but reports suggest copper is being imported for financial reasons, rather than for consumption – that said, perhaps the SRB are also in the market.

 

Other metals in China are mixed, gold is up 3.2 percent, silver is up 1.9 percent, steel rebar is unchanged, while iron ore is weaker at $55.80.

 

Equities around the global are now in retreat as concerns about China and emerging markets and the possible contagion from these regions to developed markets seems to be weighing on sentiment. Yesterday, the Euro Stoxx 50 closed off 2.2 percent and the Dow closed down 2.1 percent and Asia is down heavily this morning with the Nikkei off 2.8 percent, the Hang Seng is off 2.4 percent, the CSI 300 is down 4.4 percent and the Kospi is off 1.7 percent. The weakness looks set to circumnavigate the globe again as the pre-market Dax is off around 3 percent.

 

Currencies – despite continuing emerging market currency weakness the dollar index is falling too, last at 95.44, while the euro, sterling and yen are stronger at 1.1290, 1.5696 and 122.87. The aussie is flat-lined at 0.7305, the rouble is weak at 67.44, as is the yuan at 6.4522 and the rupee, rupiah and rand are all weaker, while the real is consolidating in low ground.

 

The economic data is focused on flash PMI – so far Japan and China’s manufacturing PMIs have come in lower than expected at 51,9 and 47.1 respectively. Later we get manufacturing and services PMI data out across Europe and the US, with data on UK public sector borrowing requirements and EU consumer confidence – see table below for more details.

 

Given the poor Chinese PMI data it is somewhat surprising that the base metals are not weaker, but it looks as though a lot of bad news is now priced-in. The rallies underway are likely to be driven by non-fundamental factors, such demand for financial reasons in China and general short-covering. We have been expecting short-covering rallies and now these seem to be getting underway. Given how bearish sentiment has been, there may be a considerable counter-trend move, but conversely the bearish fundamentals are likely to encourage scale up selling too. For now, we expect the rallies to run further.

 

Gold prices are leading a broad based rally in the precious metals driven by safe-haven demand, but in turn that is likely to be fuelled by short-covering. As the fund gross short positions have become large there may well be room for considerable rallies.

 

 

 

Overnight Performance

BST 06:05:55 +/- +/- % Lots

Cu 5077.5 -12.5 -0.2% 1731

Al 1573 5 0.3% 1158

Ni 10350 15 0.1% 641

Zn 1814 1 0.1% 185

Pb 1710 4 0.2% 139

Sn 15335 40 0.3% 29

Steel 300 0 0.0% Total

Average (BM ex-Steel) 0.1% 3883

Gold 1164.4 9.5 0.8%

Silver 15.64 0.11 0.7%

Platinum 1034.7 3.7 0.4%

Palladium 624.5 3.5 0.6%

Average PM 0.6%

 

 

SHFE Prices 6:06 BST Change % Change

Cu 38990 430 1.1%

AL 12035 45 0.4%

Zn 14830 100 0.7%

Pb 13350 20 0.2%

Ni 80600 -360 -0.4%

Sn 106000 -1270 -1.2%

Average change (base metals) 236.5 0.1%

Rebar 2033 0 0.0%

Au 242.8 7.45 3.2%

Ag 3528 66 1.9%

 

 

Economic Agenda

BST Country Data ACTUAL Expected Previous

2:35am JPY Flash Manufacturing PMI 51.9 52.10 51.20

2:45am CNY Caixin Flash Manufacturing PMI 47.1 48.10 47.80

 7:00am EUR GfK German Consumer Climate 10.20 10.10

8:00am EUR French Flash Manufacturing PMI 49.8 49.6

8:00am EUR French Flash Services PMI 52.1 52

8:30am EUR German Flash Manufacturing PMI 51.7 51.8

8:30am EUR German Flash Services PMI 53.7 53.8

9:00am EUR Flash Manufacturing PMI 52.3 52.4

9:00am EUR Flash Services PMI 54.10 54.00

9:30am GBP Public Sector Net Borrowing -2.3B 8.6B

2:45pm USD Flash Manufacturing PMI 53.9 53.8

3:00pm EUR Consumer Confidence -7 -7

 

 

Edited by SHMET

METALS MORNING VIEW – Gold prices rally, base metals hold up well considering poor Chinese PMI data

Date Aug 24 2015 09:16:09
Aug.24,2015(SHMET)--

Precious metals were stronger yesterday with average gains of two percent with gold prices up 1.9 percent and the others up between 1.7 and 2.2 percent – concerns about China and emerging markets causing contagion in broader markets seems to have refocused investors’ interest in bullion.

 

The base metals were mixed yesterday, closing with average gains of 0.4 percent, copper led on the upside with a 1.7 percent gain to $5,090, aluminium, zinc and lead were firmer, while nickel and tin were down an average of 0.9 percent.

 

This morning the gold prices are leading the way on the upside with a 0.8 percent gain to $1,164.40, the rest are up between 0.4 and 0.7 percent.

 

Base metals are mixed this morning, but generally little changed with copper off 0.2 percent at $5,077.50, the rest are up between 0.1 and 0.3 percent. Volume has been average with 3,883 lots traded as of 06:05 BST – so far this week volume at this time of day has averaged 3,212 lots, down from an average of 10,523 lots last week, so the markets do seem to have settled down after the post-Chinese devaluation gyrations.

 

In China, the base metals are for the most part firmer by an average of 0.6 percent with copper up the most with a 1.1 percent gain to Rmb 38,990, while nickel and tin are negative, with tin down 1.2 percent and nickel off 0.4 percent. The latter two may be off as China has forced some heavy industry to halt production to clean the air around Beijing, this is especially affecting the steel industry, which could be impacting the stainless steel and tin-plating industries.

 

Spot copper in Changjiang is up 0.9 percent at Rmb 39,100-39,200, the backwardation with the October contracts is at an equivalent of $32 per tonne and the LME/Shanghai copper arb ratio is at 7.77, which means the arb window is open – this finally seems to be underpinning copper, but reports suggest copper is being imported for financial reasons, rather than for consumption – that said, perhaps the SRB are also in the market.

 

Other metals in China are mixed, gold is up 3.2 percent, silver is up 1.9 percent, steel rebar is unchanged, while iron ore is weaker at $55.80.

 

Equities around the global are now in retreat as concerns about China and emerging markets and the possible contagion from these regions to developed markets seems to be weighing on sentiment. Yesterday, the Euro Stoxx 50 closed off 2.2 percent and the Dow closed down 2.1 percent and Asia is down heavily this morning with the Nikkei off 2.8 percent, the Hang Seng is off 2.4 percent, the CSI 300 is down 4.4 percent and the Kospi is off 1.7 percent. The weakness looks set to circumnavigate the globe again as the pre-market Dax is off around 3 percent.

 

Currencies – despite continuing emerging market currency weakness the dollar index is falling too, last at 95.44, while the euro, sterling and yen are stronger at 1.1290, 1.5696 and 122.87. The aussie is flat-lined at 0.7305, the rouble is weak at 67.44, as is the yuan at 6.4522 and the rupee, rupiah and rand are all weaker, while the real is consolidating in low ground.

 

The economic data is focused on flash PMI – so far Japan and China’s manufacturing PMIs have come in lower than expected at 51,9 and 47.1 respectively. Later we get manufacturing and services PMI data out across Europe and the US, with data on UK public sector borrowing requirements and EU consumer confidence – see table below for more details.

 

Given the poor Chinese PMI data it is somewhat surprising that the base metals are not weaker, but it looks as though a lot of bad news is now priced-in. The rallies underway are likely to be driven by non-fundamental factors, such demand for financial reasons in China and general short-covering. We have been expecting short-covering rallies and now these seem to be getting underway. Given how bearish sentiment has been, there may be a considerable counter-trend move, but conversely the bearish fundamentals are likely to encourage scale up selling too. For now, we expect the rallies to run further.

 

Gold prices are leading a broad based rally in the precious metals driven by safe-haven demand, but in turn that is likely to be fuelled by short-covering. As the fund gross short positions have become large there may well be room for considerable rallies.

 

 

 

Overnight Performance

BST 06:05:55 +/- +/- % Lots

Cu 5077.5 -12.5 -0.2% 1731

Al 1573 5 0.3% 1158

Ni 10350 15 0.1% 641

Zn 1814 1 0.1% 185

Pb 1710 4 0.2% 139

Sn 15335 40 0.3% 29

Steel 300 0 0.0% Total

  Average (BM ex-Steel) 0.1% 3883

Gold 1164.4 9.5 0.8%

Silver 15.64 0.11 0.7%

Platinum 1034.7 3.7 0.4%

Palladium 624.5 3.5 0.6%

  Average PM 0.6%

 

 

SHFE Prices 6:06 BST Change % Change

Cu 38990 430 1.1%

AL 12035 45 0.4%

Zn 14830 100 0.7%

Pb 13350 20 0.2%

Ni 80600 -360 -0.4%

Sn 106000 -1270 -1.2%

Average change (base metals) 236.5 0.1%

Rebar 2033 0 0.0%

Au 242.8 7.45 3.2%

Ag 3528 66 1.9%

 

 

Economic Agenda

BST Country Data ACTUAL Expected Previous

2:35am JPY Flash Manufacturing PMI 51.9 52.10 51.20

2:45am CNY Caixin Flash Manufacturing PMI 47.1 48.10 47.80

 7:00am EUR GfK German Consumer Climate 10.20 10.10

8:00am EUR French Flash Manufacturing PMI 49.8 49.6

8:00am EUR French Flash Services PMI 52.1 52

8:30am EUR German Flash Manufacturing PMI 51.7 51.8

8:30am EUR German Flash Services PMI 53.7 53.8

9:00am EUR Flash Manufacturing PMI 52.3 52.4

9:00am EUR Flash Services PMI 54.10 54.00

9:30am GBP Public Sector Net Borrowing -2.3B 8.6B

2:45pm USD Flash Manufacturing PMI 53.9 53.8

3:00pm EUR Consumer Confidence -7 -7

 

Edited by SHMET

METALS MORNING VIEW – Base metals struggle as it remains a buyers’ market

Date Aug 19 2015 09:05:20
Aug.19,2015(SHMET)--

Recap of yesterday - Metals closed down an average of 0.6 percent yesterday, tin bucked the trend with a 0.6 percent gain and nickel was up slightly, while the others were off between 0.6 percent for aluminium and 1.8 percent for lead – copper closed off 1.1 percent at $5,115. Precious metals for the most part edged higher yesterday with gold, silver and platinum up an average of 0.4 percent, while palladium dropped 0.5 percent. The gold price ended the day at $1,117.

 

This morning - The base metals are mixed but off an average of 0.3 percent led by a 1.4 percent drop in tin, nickel is off 0.7 percent, copper is down 0.2 percent at $5,106.50, while zinc is up 0.1 percent and aluminium and lead are up 0.3 percent. Volume remains light with 2,482 lots traded, well down from last week’s average at this time of day of 10,523 lots. The continuing drift in prices highlights that it is a buyers’ market, with buyers not in any hurry to buy, while sellers need to take what bids there are.

 

Precious metals are slightly firmer with the PGMs up 0.4 percent, gold up 0.1 percent at $1,118.50 and silver little changed at 15.29. The precious metals are doing well to hold up as the dollar is firmer.

 

In Shanghai, the base metals are for the most part weak with zinc off 0.8 percent, copper and tin are down 0.7 percent, with copper at Rmb 38,970, aluminium is off 0.5 percent and nickel is down 0.2 percent, while lead is bucking the trend with a 0.7 percent gain.

 

Spot copper in Changjiang is unchanged at Rmb 39,150-39,280, the backwardation with the October contracts is at an equivalent of around $50/tonne, while the LME/Shanghai copper arb ratio is at 7.67, so the arb window is open, not that it it giving much support to LME copper prices.

 

Equities managed to get some lift yesterday with the Euro Stoxx 50 up 0.2 percent and the Dow closed up 0.4 percent, while Asia is weaker this morning led by a 1.5 percent drop in the CSI 300, the Nikkei is off 0.1 percent, the Hang Seng is off 0.4 percent and the Kospi is down 0.3 percent.

 

Currencies – the dollar is climbing again with the dollar index at 96.95, the euro is drifting lower, last at 1.1058, as is sterling at 1.5580, while the aussie and yen are flat at 0.7366 and 124.47, the rouble is slightly firmer at 64.43 and the yuan is little changed at 6.4450. The emerging market currencies remain weak following China’s devaluation; this is an area to monitor to see if the fallout is escalating.

 

Data out overnight showed a mixed picture on housing in China. New home prices fell an average of 3.7 percent in July from a year earlier, but this was less of a decline than the 4.9 percent seen in June, or the peak of 6.1 percent seen in March and April.  But, new home prices climbed in 31 out of the 70 cities monitored, which was up from 27 previously, they dropped in 29 and were flat in 10. So perhaps there are some signs of a recovery underway.

 

Data out today is focused on UK price data, which may throw light on when the Bank of England might start to tighten monetary policy, while US data includes housing starts and building permits – see table below for more details.

 

The base metals remain on a back footing, the path of least resistance continues to the downside, the markets look oversold and are vulnerable to short-covering, but sentiment remains bearish and so far there has been no catalyst to prompt enough buying to trigger short-covering rallies. The real lack of bullishness comes from the weak outlook for Chinese demand, so it would take a change there to change sentiment.

 

For now bullish supply side developments continue to have little effect, whether it be supply disruptions in copper or nickel, or signs of a deficit developing in zinc, with ILZSG data now showing two months of supply deficit. We are not even sure whether a weaker dollar would have too much of an impact on the base metals. Today’s FOMC Meeting minutes are likely to keep the focus on September for a Fed rate rise, but these minutes where for a meeting held before the Chinese devaluation so the market is likely to take that into account when it deciphers the minutes.

 

The precious metals continue to hold up well, especially gold and platinum, while palladium and silver are drifting a bit more. For now, we feel the gold price is being underpinned by concerns that the Chinese devaluation may be the thin end of the wedge. 

 

 

 

Overnight Performance                

BST       06:03:05       +/-   +/- %     Lots

Cu  5106.5   -8.5 -0.2%     1013

Al    1570.5   4.5  0.3%      458

Ni    10560    -70  -0.7%     600

Zn   1815      1     0.1%      258

Pb   1725      4.5  0.3%      140

Sn   15300    -210       -1.4%     13

Steel     300 0     0.0%      Total

      Average (BM ex-Steel)      -0.3%     2482

Gold       1118.5    1.5  0.1%     

Silver     15.29     0     0.0%     

Platinum       998.9     3.9  0.4%     

Palladium     614.2     2.2  0.4%     

      Average PM       0.2%     

 

 

SHFE Prices 6:07 BST          Change % Change

Cu  38970    -270       -0.7%

AL 12015    -65  -0.5%

Zn   14790    -115       -0.8%

Pb   13370    90   0.7%

Ni    81800    -200       -0.2%

Sn   107160  -740       -0.7%

Average change (base metals)      236.5          -0.4%

Rebar    2056      -18  -0.9%

Au   232.9     0.8  0.3%

Ag   3459      -11  -0.3%

 

 

 

 

Economic Agenda

BST       Country Data      ACTUAL       Expected      Previous

9:30am  GBP      CPI y/y        0.0%      0.0%

9:30am  GBP      PPI Input m/m          -1.8%     -1.3%

9:30am  GBP      RPI y/y        1.0%      1.0%

9:30am  GBP      Core CPI y/y      0.8%      0.8%

9:30am  GBP      HPI y/y        5.9%      5.7%

9:30am  GBP      PPI Output m/m       -0.1%     0.0%

1:30pm  USD      Building Permits       1.23M    1.34M

1:30pm  USD      Housing Starts         1.19M    1.17M

 

Edited by SHMET

METALS MORNING VIEW – Metals under pressure ahead of key US employment report

Date Aug 10 2015 08:44:34
Aug.10,2015(SHMET)--

Base metals continued to move lower yesterday, posting an average loss of 0.3 percent, but it will be remarked that they reversed some of their losses during the second half of the day. The ongoing weakness in the base metals complex reflects deflationary pressure stemming from the steep sell-off in energy prices, and a cautious investor sentiment ahead of the release of the US employment report. Zinc was the worst performing base metal, down 1.3 percent, followed by lead (-0.6 percent), aluminium (-0.3 percent), and copper (-0.1 percent). On the other hand, nickel posted a modest gain of 0.2 percent, while tin finished the day unchanged.

 

In contrast, the precious metals complex held relatively better, partly reflecting the drop in equities in so far as precious metals tend to be negatively correlated with equities. Further, money managers, who had already sold aggressively the complex, were likely not comfortable with taking on additional short positions ahead of key US employment report, which could influence significantly the US dollar and therefore the precious metals markets.

 

This morning, base metals are slightly weaker amid thin volumes, led by copper, down 0.4 percent, followed by nickel and zinc, down 0.3 percent each. Lead is down 0.2 percent, aluminium is off 0.1 percent, while tin remains unchanged. On the other hand, the precious metals complex is trading higher, with silver and platinum up 0.4 percent each, palladium up 0.3 percent, although gold is off 0.1 percent.

 

In Shanghai, the July base metals contracts are weaker, with zinc leading the declines (-1.4 percent). Nickel is down 0.9 percent, copper is off 0.8 percent, while aluminium and lead are down 0.7 percent and 0.2 percent, respectively. Tin is the only metal posting a gain this morning, up 0.4 percent. Meanwhile, spot copper in Changjiang is down 0.7 percent at Rmb 38,250-38,400, while the backwardation with the futures is at $84 per tonne and the LME/Shanghai copper arb ratio is slightly up from yesterday at 1 to 7.43, which indicates that the arb window is now open to most traders. In contrast, the precious metals complex is marginally firmer, with gold and silver up 0.3 percent and 0.2 percent, respectively.

 

Bonds – Government bonds rallied strongly on Thursday, pushing yields lower, as the sell-off in broad equities likely prompted investors to seek safe-haven assets, such as bonds, while the sharp decline in crude oil prices continued to push inflation expectations down, leading investors to increase their exposure to bonds, which tend to perform better in a low inflation environment. As such, the US 10-year yield fell 3 basis points (or 1.51 percent) at 2.24 percent. In the eurozone, the Germany 10-year yield dropped 4 basis points (or 5.97 percent) at 0.71 percent, the France 10-year yield closed down 5 basis points (or 5.07 percent) at 1.01 percent, while the Portugal 10-year yield was down 4 basis points (or 1.72 percent) at 2.46 percent. The relative outperformance of bonds in core countries relative to peripheral countries suggests that investors are still concerned about difficult negotiations between Greece and its creditors for a Greek bailout #3.

 

Stocks – US stocks sold off quite sharply yesterday as investors likely preferred to adopt a cautious stance by reducing their stock exposure ahead of the US employment report released later today in so far as the Federal Reserve’s decision-making process regarding the normalisation of its monetary policy may largely be influenced by the employment situation in July. Similarly, European stocks ended lower after reaching a two-week high yesterday, partly reflecting weakness in the energy sector amid lower oil prices. The Euro Stoxx 50 closed down 0.23 percent at 3,668.  In Asia this morning, equities are stronger despite the sell-off in US and European equities yesterday. Although the Kospi is down 0.21 percent, the Nikkei 225 is up 0.25 percent after the Bank of Japan (BoJ) decided to maintain its accommodative stance, in line with expectations, the Hang Seng is up almost 1 percent, while the CSI 300 is up 2.22 percent.

 

Currencies – The US dollar moved slightly down against most currencies on Thursday after reaching a three-week high earlier this week (on an intraday basis). The greenback was down against the euro after retail PMI in the eurozone surged to its highest level since January 2011, and against the sterling after the Bank of England revealed that only one of its nine policy makers voted for a rate increase at the August meeting, which likely pushed market expectations for an initial increase in UK rate to later next year. On the other hand, the dollar was down against the Japanese yen, the Canadian dollar, the Mexican peso, and the Chilean Peso. On net, the US dollar index (DXY) closed down 0.16 percent at 97.8060.

 

The economic agenda will be dominated by the release of the US July employment report at 1:30pm, UK time. Meanwhile, the Bank of Japan held its monetary policy meeting yesterday and today, and released its latest monetary policy statement, indicating that it will not increase its monetary policy stance, rather, it will continue to increase its monetary base at an annual pace of 80 trillion yen, suggesting that BoJ Governor Kuroda is confident that inflation will gradually move toward 2 percent over the medium term without the need to expand further monetary stimulus. Moreover, macroeconomic data already released today indicated that Germany recorded a surplus of 22.0 billion euros in June, below market expectations of 23.2 billion euros, and down from a 22.8-billion euro surplus last month, while its industrial production declined 1.4 percent in June, far below market expectations of a 0.3 percent, and down from 0.0 percent in May.

 

 

 

Base metals continue to remain vulnerable to further downside, reflecting weak investor sentiment due to global deflationary pressure stemming from broad-based declines across the commodity markets and the recent weakness in Chinese equities, which is likely to have adverse implications for economic growth in Q3. As such, we believe that the complex will likely continue to weaken further until speculators reach an extreme short positioning, which could therefore lead to a short-covering rally, although we hold the view that a sustainable rally would be possible if and only if a shift in sentiment occurs.

 

As regards the precious metals complex, given that the spec positioning has deteriorated remarkably since June while the market appears to be technically oversold in the near term, it seems to us that shorts are beginning to run out of steam and are currently not inclined to take on additional positions, which increases the likelihood of a short-covering rally, especially in case of weaker-than-anticipated US employment report.

 

Overnight Performance

BST 06:05 +/- +/- % Lots

Cu 5163.5 -21 -0.4% 1989

Al 1590.5 -1 -0.1% 162

Ni 10810 -35 -0.3% 572

Zn 1864 -5 -0.3% 784

Pb 1702.5 -3 -0.2% 108

Sn 15450 0 0.0% 0

Steel 300 0 0.0% Total

  Average (BM ex-Steel) -0.2% 3,615

Gold 1088.8 -0.7 -0.1%

Silver 14.7 0.06 0.4%

Platinum 952.8 3.8 0.4%

Palladium 598 2 0.3%

  Average PM 0.3%

 

SHFE Prices 6:18 BST Change % Change

Cu 37730 -290 -0.8%

AL 11985 -80 -0.7%

Zn 14435 -200 -1.4%

Pb 12845 -30 -0.2%

Ni 80280 -740 -0.9%

Sn 107600 460 0.4%

Average change (base metals) -0.6%

Rebar 2054 -27 -1.3%

Au 219.35 0.6 0.3%

Ag 3216 8 0.2%

 

Economic Agenda

BST Country Data ACTUAL Expected Previous

4:20am Japan Monetary Policy Statement

Tentative Japan BOJ Press Conference

07:00am EU German Industrial Production m/m -1.4% 0.3% 0.0%

07:00am EU German Trade Balance 22.0B 23.2B 22.8B

07:45am EU French Gov Budget Balance -63.9B

07:45am EU French Industrial Production m/m 0.3% 0.4%

07:45am EU French Trade Balance -3.7B -4.0B

01:30pm US Average Hourly Earnings m/m 0.2% 0.0%

01:30pm US Non-Farm Employment Change 220K 223K

01:30pm US Unemployment Rate 5.3% 5.3%

 

Edited by SHMET
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