metal daily

This morningBase metal prices changed less than 0.5% since closing yesterday: copper +0.5%, aluminium +0.3%, nickel -0.25%, lead -0.25%, zinc +0.3% and tin -0.1%.What's moving markets?Global stocks were mixed but mostly in the green, as investors weighed strong earnings against fresh concerns about China’s clampdown on the tech sector. The Q221 earnings season has smashed expectations this year, according to Bernstein estimates, with more than half of S&P 500 companies having reported, 92% managed to meet or beat earnings estimates while 86% have done so with their revenues - the highest beat ratios since Q108. In Europe, results have also been exceeding forecasts, especially among cyclical stocks. This explains how solid equities have been even amid the China regulatory scare and a bond market that’s flashing bearish economic signals. The bond-stock contradiction continues. Yields on US 10-year Treasuries slipped 1bp to 1.17% and the USD index was slightly stronger. The IBD/TIPP Economic Optimism Index in the US fell by another 0.7 points to 53.6 in August 2021, the lowest since February, as consumers were less optimistic about near-term prospects for the US economy and the outlook for personal finances. The six-month outlook for the US economy slipped to a six-month low of 50.2, and the personal finances sub-index fell 1.9 points to 57.8. The precious metals complex drifted lower on profit-taking in low volume subdued trading, waiting for the US non-farm payrolls report for fresh direction and clues on the economy and likely policy measures. Gold held steady as nominal yields softened while, more importantly, real US yields hit new lows again today. This lowers the opportunity cost of hold gold and is there a bullish development. Base metals turned lower in typical roller-coaster summer trading, with Covid-19-related concerns dominating sentiment. SHFE aggregate open interest is falling across all metals except lead, suggestive of length liquidating as Asia stock markets come under a bit of pressure. Zinc led the sector lower on the back of falling steel prices in China. Galvanised steel is an important sector for zinc usage. Supply constraints for various reasons (lockdowns, strike votes, power rationing) haven’t gone away, while worries over slowing global growth persist. These factors lie behind consensus price forecasts (see Theme of the Day) indicating prices have peaked amid a higher-for-longer scenario.  SHFE steel prices and domestic hot-rolled coil prices in China turned downward following confusing statements regarding carbon emissions reductions from a meeting of the Politburo of China’s Communist Party. This suggested to cool efforts to reduce carbon emissions by tightening controls on heavy industry, in order to safeguard economic stability. Iron ore prices stabilised following the sharp sell-off last week. However, prices are likely to come under further pressure as Chinese authorities push ahead with plans to reduce emissions from the steel industry. The China Iron & Steel Association said that there will be more notable reductions in crude steel output. Daily production at major mills fell 5.6% in the first 10 days of July from June. 

Theme of the Day: What are consensus forecasts telling us about metals prices?