Three month LME zinc prices rallied for the fifth straight session as a sharp sell-off in the dollar against a basket of major currencies as well as improving fundamentals in China buoyed demand for the metal.
The Bank of England’s MPC are due to release their base rate decision later today which the majority of market participants expect to remain unchanged at 0.5%.
Copper, aluminium and zinc managed to hold onto Friday’s gains during early morning trading on Monday, finding firm support around the previous session’s close as upbeat investors reacted positively to the expectation of further output cuts.
Further details regarding the Fed’s interest rate outlook were provided over the weekend as Vice Chairman Stanley Fischer signalled that there may be sufficient strength in the US economy to support an interest rates rise this year.
Recent volatility reminds us of June 2013 where global asset prices exhibited significant “taper tantrum” as the Fed reined in its asset purchase programme
Glencore has announced its decision to cut its annual zinc output by more than a third as the natural resources group struggles to navigate in a market dominated by weaker prices for industrial metals.
Yesterday’s release of September’s FOMC meeting minutes saw policymakers vote overwhelmingly in favour of holding rates at the current record lows.
Alcoa reported lower than expected earnings for the third quarter as a slowing Chinese economy and softer prices throughout much of the year saw EPS drop to 7 cents from 31 cents for Q3 2014.
LME warehouse stockpiles of zinc shot up 7.8% yesterday alleviating some of the upward price pressure which has seen three month LME zinc prices rally over 20% since bottoming out at a year-to-date low of $1,981/tonne in mid-March, rising to a fresh year-to-date high just above $2,400/tonne earlier this month. Yesterday’s release of Aprils FOMC meeting minutes indicated that policymakers were increasingly expressing doubts regarding the strength of the US recovery as unimpressive economic data saw the prospects of an interest rates rise this summer diminish.
Three month LME zinc futures rallied for a second day, climbing back towards $2,375/tonne after adding almost 2% yesterday as prices continued to recover some of the previous week’s losses. The Bank of England cut its growth outlook for the UK in its quarterly inflation report, revising downwards its forecasts for economic growth over the next three years.
Three month LME copper prices shed almost 3% yesterday after a positive start to the week saw the red metal open at a four week high at $6,173/tonne. Asian indices headed higher overnight as they tracked a stronger session on Wall Street and continued to mull over the impact of further stimulus measures by the PBOC. The dollar index headed higher early this morning as the greenback built on support offered at yesterday’s close.
The People’s Bank of China moved to increase stimulus as details of additional easing measures were released over the weekend. Mainland Chinese equity indices led the slide lower as the majority of Asian benchmarks erased some of the recent gains after investors viewed the recent rally as overdone. Industrial metals lifted higher after the PBOC move with three month LME lead prices rallying to their highest level year-to-date early on this morning, trading back above $2,050/tonne.
The yen recovered most of yesterday’s losses against the dollar during overnight trading, strengthening briefly towards 117.30 before settling around 117.50 ahead of the European session. Spot gold prices rallied to a five month high on Tuesday with prices surging 1.54% higher as the yellow metal found firm support around the previous session’s close. Three month LME zinc prices added 1.3% yesterday to end the session at $2,100/tonne as investors expressed quiet optimism ahead of today’s US housing data.
Both US and European equity indices rebounded strongly yesterday as stronger than expected economic data encouraged a fresh round of buying among investors. Three month LME zinc prices headed lower for a second session yesterday, closing below $2,250/tonne as investors re-positioned themselves ahead of housing data due out later today. Three month nickel futures also experienced further sideways trading as prices remained resistance once more to protracted moves above $15,800/tonne.
US markets faltered yesterday, erasing a large portion of Monday’s gains as geopolitical tensions took centre stage once again. Adding impetus to the sell-off in US markets the release of stronger than anticipated macro data saw further risk aversion as the potential for a sooner than expected interest rate rise rose in prominence. The VIX surged back towards 16.90 after spiking to a three month high at the start of the month as risk aversion increased.
US inflation data released yesterday bolstered the view that the Fed will maintain low interest rates, with headline CPI coming in line with expectations in June at 0.3% m/m, slightly below the 0.4% reading the previous month. Asian benchmark indices extended their rally during overnight trading as flaring violence in the Middle East and unrest between Russia and Ukraine continued to take a backseat for sanguine Asian investors.