LME base metals higher as Chinese traders return to market

Monday, February 15, 2016

Bullish moves for LME nickel prices overnight with the three month rolling forward garnered support at Friday’s close and rallied as much as 5.6% higher overnight as Chinese investors returned to market after the week long Chinese New Year celebrations. Nickel prices rallied towards $8,260/tonne at one point before paring some of these gains as we approached the European session, trading around $8,165/tonne at the time of writing. Similar moves were seen across the base metals complex as market participants were encouraged by the supportive comments from the PBOC over the weekend. Last week was a particularly volatile week for the base metals as investors struggled with direction, even failing to take cues from a weaker USD which should have offered some support to commodity prices. This week we are hoping that the supportive comments from the PBOC over the weekend as well as dovish comments from Janet Yellen in her testimony last week will alleviate immediate concerns of further turmoil and as Chinese traders slowly return in the New Year we could see some bullish moves across the base metals.

Comments from PBOC governor Zhou Xiaochuan over the weekend went some way to calm markets, with the mood across Asia at the start of the week largely upbeat. Governor Xiaochuan allayed market fears with respect to capital outflows and commented that there were no plans to allow the yuan to weaken further. The offshore exchange rate strengthened for a ninth straight session adding to the 2% month-to-date appreciation against the dollar and with the PBOC fixing the midpoint for the onshore yuan rate 0.3% stronger against the greenback to 6.5118 on Monday we expect subsequent support over the coming week to assuage fears of any additional largescale capital flight.

In a sign that market sentiment was improving gold prices plummeted almost 2% overnight, adding to Friday’s modest losses as appetite for risk displayed a market improvement at the start of the week. Spot prices for the precious metal are trading back towards $1,210/oz this morning as investors take their cue from the PBOC’s supportive comments over the weekend. Given the impulsiveness of the recent rally which has seen the yellow metal add as much as 12% since the start of the month we could see further protracted selling over the coming sessions as risk aversion continues to dissipate.

LME nickel prices build on Friday's gains

LMNIDS03 Comdty LME NICKEL 3 2016 02 15 08 03 10

Gold prices come under pressure as risk appetite grows

XAU Curncy Gold Spot Oz D 2016 02 15 08 25 44

Events for today

US Market Holiday 

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JP

Q4

GDP (14/02/16)

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GE

Jan

Wholesale Price Index (13/02/16)

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UK

Feb

Rightmove House Prices

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CN

Jan

Trade Balance

0430

JP

Dec

Industrial Production

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EZ

Dec

Trade Balance

Topics: Gold, Base Metals, LME, Nickel, CNH
More from: Kash Kamal