LME nickel prices hold their nerve but outlook under pressure from burgeoning Chinese debt

Wednesday, February 17, 2016

Three month LME nickel futures managed to hold onto previous gains yesterday as prices opened firmly around the previous session’s close and traded towards $8,350/tonne. Activity this morning has seen some modest sell-off as prices trade back round $8,250/tonne at the time of writing, however, we look to see if the market can hold onto support around this level which would strengthen the case for additional gains over the near term.

For now though, Chinese investors seem cautiously optimistic as risk appetite fuelled by PBOC assurances and positive sentiment after the Chinese New Year conflicts with Chinese debt concerns. Tomorrow’s release of Chinese CPI and PPI data for January will offer further details on whether policymakers in Beijing have been successful in lifting economic prospects. Consensus expectations are for a 1.9% y/y increase in consumer prices, however, factory gate prices are expected to decline by 5.4% y/y in January which would mark 45 straight months of falling producer price inflation.  

Spot gold prices gained some support towards $1,200/oz during overnight trading despite moves lower testing appetite for prices around $1,190/oz. Prices lost almost $50 earlier this week as renewed risk appetite saw investors pull out of the safe haven. However, with global growth jitters still dominating the outlook for many investors the precious metal has gained some support for a rebound back towards $1,210/oz. We expect gold prices to trade with some volatility over the coming sessions as investors react acutely to macro data releases as well as comments from central bankers.

Front month Brent crude futures struggled to push past the 50 day moving average yesterday as the global benchmark was subjected to a protracted sell-off throughout much of the day. Front month prices had an encouraging start to the day, rising towards $35.60/bbl on the hopes that a meeting between the oil ministers of Saudi Arabia, Russia and  Venezuela would see the positive step of production cuts take place. However, investors were once again disappointed as the only progress seen to be made was a promise to freeze output. Brent futures for April delivery traded 10% lower from their peak, ending the session at $32.18/bbl and reversing a large majority of the recent gains. Activity early this morning has seen a continuation of this downward pressure, with futures trading around $32/bbl early on.

LME 3-M nickel futures take a pause after the recent rally

LMNIDS03 Comdty LME NICKEL 3 2016 02 17 07 45 15

Gold prices find some support around $1,200/oz

XAU Curncy Gold Spot Oz D 2016 02 17 08 02 06

Events for today

0930

UK

Jan

Unemployment

1330

US

Jan

Housing Statistics

1415

US

Jan

Industrial Production

1900

US

Jan

FOMC meeting Minutes

2350

JP

Jan

Trade Balance

Topics: Gold, Crude oil, Brent, LME, Nickel, CPI
More from: Kash Kamal