Forecasts and market analysis based on price assessments from Fastmarkets MB and Fastmarkets AMM

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April 2022 | Base Metals

Base metals generally lower on the LME, but stronger in China

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Base metals prices on the London Metal Exchange were mainly weaker on the morning of Wednesday April 27, while those on the Shanghai Futures Exchange were generally stronger.

* The slide in China’s renminbi yuan has halted, but the alarm bell is still ringing
* United States 10-year treasuries yields have weakened, which is another sign of haven demand

Base metals
Three-month tin prices on the LME were up by 0.6% at $40,700 per tonne this morning, the rest of base metals prices (apart from nickel, which has yet to open) were down by an average of 0.3%. Copper was down by 0.1% at $9,790.50 per tonne. On the chart, copper is holding precariously above the lows seen in February.

The most-traded contracts on the SHFE were, for the most part, higher on Wednesday morning. The exceptions were June lead, which was down by 0.7% and copper, which was unchanged at 73,100 yuan ($11,156) per tonne. The rest were up by an average of 1.4%, with support from China's central bank underpinning sentiment.

Precious metals
Gold prices are holding above support at around $1,890 per oz. They were last seen at $1,899.95 per oz and have been as low as $1,892 per oz in recent days. The rest of the precious metals look vulnerable too.

Wider markets
United States 10-year treasuries yields were weaker on Wednesday morning and were recently at 2.77%, having been 2.88% at a similar time on Tuesday. The weaker yield suggests a pick-up in investor nervousness.

Asia-Pacific equities were mixed on Wednesday morning: the Nikkei (-1.14%), the Kospi (+0.48%), the CSI 300 (+2.41%), the Hang Seng (+0.5%) and the ASX 200 (-0.88%).

The US Dollar Index continues to climb and was recently at 102.00, compared with 101.58 at a similar time on Tuesday.

The other major currencies were weaker: the euro (1.0629), the Japanese yen (127.85), sterling (1.2590) and the Australian dollar (0.7173).

Key data
Key economic data already out on Wednesday includes Germany’s GfK consumer climate index, which came in at -26.5 in April, after -15.7 in March.

Later, there is United Kingdom data on realized sales with US data on the goods trade balance, wholesale inventories, pending home sales and crude oil inventories.

In addition, European Central Bank president Christine Lagarde is scheduled to speak.

Wednesday’s key themes and views
Base metals are finding some support this morning around the previous lows seen in February. Given that the market has been in the habit of finding support in the dips, it is not surprising that bargain hunting is once again emerging, but we would be wary. We think there are now enough headwinds coming from different directions to be of concern. The unusually sharp move in the yuan is another cause for concern, as is the weakness in other currencies while the dollar forges ahead.

Gold and the other precious metals also look vulnerable on the charts. We would be looking for gold to pick up some haven demand before too long, but it may still get caught up in a broad based sell-off if one unfolds.