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January 2022 | Base Metals

Base metals prices nudge up as markets consolidate ahead of US jobs report

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Base metals prices on the LME and the SHFE were mostly up on the morning of Friday January 7, with the weakness from the middle of the week once again attracting dip buying and with broader markets likely to take direction from today’s US employment report.

Unrest in Kazakhstan has lifted oil prices, the country is a large producer of base metals too.

Base metals
Three-month prices on the London Metal Exchange were mixed, nickel ($20,625 per tonne) and aluminium ($2,947 per tonne) were the main risers, with gains of 1.2% and 0.6% respectively, with nickel rebounding and aluminium continuing its move higher. The rest of the metals were little changed, ranging between a fall of 0.1% for zinc ($3,560 per tonne) and a 0.2% increase for copper ($9,582.50 per tonne).

The most-traded February base metals contracts on the Shanghai Futures Exchange were mainly higher too, with the exception of copper, which was down by 0.6% at 69,490 yuan ($10,901) per tonne. The other base metals were up by an average of 1.1%, albeit skewed by a 2.2% rise in aluminium and a 2% rise in lead.

Precious metals
Spot gold was consolidating after recent weakness and was recently at $1,790.62 per oz, silver continued lower, down by 0.4% at $22.08 per oz, while platinum and palladium were recovering from recent weakness with platinum ($966.50 per oz) and palladium ($1,882.40 per oz) up by 0.3% and 0.6% respectively.

Wider markets
The yield on United States 10-year treasuries remains firmer and was recently at 1.72%, unchanged from a similar time on Thursday, albeit down from overnight highs of 1.75%.

Asia-Pacific equities were mainly up this this morning: the Kospi (+1.18%), the CSI 300 (+0.09%), the ASX 200 (+1.29%) and the Hang Seng (+1.58%), while the Nikkei (-0.03%) was little changed.

The US Dollar Index at 96.22 was slightly weaker than where it was at a similar time on Thursday (96.37). Resistance levels are now seen lying between 96.70 and 96.94, with support around 95.50.

The other major currencies were mainly consolidating this morning: the euro (1.1301), the Japanese yen (115.88) and sterling (1.3535), while the Australian dollar (0.7153) was weaker.

Key data
Key economic data already out on Friday shows Germany’s industrial production fell by 0.2% in November after a 2.4% rise in October, French industrial production fell by 0.4% in November, after a 0.9% rise in October and French consumer spending climbed by 0.8% in November, after a 0.6% fall in October.

Later on Friday there will be data on the United Kingdom construction purchasing managers index (PMI) and housing equity withdrawals, the European Union's consumer prices index (CPI) and retail sales, along with the US employment report and data on consumer credit.

In addition, UK Monetary Policy Committee member Catherine Mann is scheduled to speak.

Friday’s key themes and views
Overall, the base metals look robust and are either consolidating or trending higher, with aluminium and zinc in the latter camp - no doubt due to disruption to production in Europe as a result of high energy prices. The fact that recent weakness once again attracted dip-buying interest suggests there is little appetite for being short of metal.

Despite geopolitical tensions and some nervousness in broader markets in the face of the US Federal Reserve being in tightening mode, gold prices are under pressure. For now, the stronger dollar, firmer yields and general risk-off sentiment seem to be a headwind for the precious metals.