Off The Wire
METALS-Metals bashed by equity market fall, lead hits 2-year lows
Benchmark LME lead sank to its lowest since September 2016 at $1,876 but ended the session 4.7 percent higher at $1,999 per tonne. Aluminium touched a two week low, ending 1.3 percent down at $2,020. A global measure of equity prices fell to a one-year low on Thursday as investors feared an escalating U.S. trade war with China and risks from a recent climb in interest rates. This has overpowered positive supply and demand signals for metals, Deutsche Bank analyst Nick Snowdon said.
The U.S.-China trade dispute has reduced demand for riskier assets and helped push the London Metal Exchange (LME) index of industrial metals down 15 percent since June. "There's a divergence between very supportive near-term micro fundamental trends (for metals) and much greater uncertainty at the macro level," Snowdon said.
LEAD: Lead has fallen some 7 percent since Oct. 2 and is down nearly 30 percent from a high in February.
TECHNICALS/FUNDS: A break below technical levels, including its August low, had triggered selling and intensified pressure from financial investors betting on lower prices, a trader in London said.
STOCKS: Supporting prices are stock drawdowns. Inventories in LME warehouses at 116,375 tonnes are down around 20 percent this year and near 9-year lows. Stocks in Shanghai Futures Exchange warehouses have slipped more than 70 percent this year to just over 11,000 tonnes. SUPPLY: The global refined lead market will, however, flip to a surplus of 50,000 tonnes next year after a deficit of 123,000 tonnes in 2018, the International Lead and Zinc Study Group (ILZSG) said this week. OUTLOOK: Lead is likely to hold up, consultants Wood Mackenzie said in a note. "Refined supply will still exceed demand to 2021, but not to the extent that prices tank substantially," analyst Giles Lloyd wrote.
COPPER: LME copper was barely changed at $6,242 a tonne after touching its weakest since Sept. 20. It was holding above its technically important 50-day moving average at $6,098. SPREAD/STOCKS: In two signals of a tight market, cash copper has flipped from a discount to a premium of $11.75 over the three month contract and stocks in LME warehouses fell further to 170,100 tonnes, the lowest since mid-2016. OTHER METALS: Zinc traded 0.8 percent lower at $2,606, nickel ended a touch lower at $12,675 after touching a one-week low and tin ended 1.3 percent higher at $19,275. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Top base and precious metals analysis - GFMS ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Tom Daly; Editing by Kirsten Donovan and Alexander Smith)
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