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April 2022 | Base Metals

LME base metals prices rise on Chinese stimulus promises, but overall still vulnerable

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Base metals prices on the London Metal Exchange edged up across the board on the morning of Friday April 29, as were most on the Shanghai Futures Exchange, with the exception of aluminium.

* The slide in China’s renminbi yuan continues
* China’s Politburo promises macroeconomic support for the economy
* Apple warns of a hit from supply headwinds
* US economy contracts 1.4% in the first quarter

Base metals
Three-month base metals prices on the LME were up by an average of 0.7%, led by a 1.2% rise in copper to $9,878.50 per tonne and a 1.1% rise in tin to $40,365 per tonne.

China’s promise that it will stick to its economic targets and instigate further stimulus moves has provided support, but Apple’s warning that it is set to take an $8 billion hit from supply chain issues is a warning about the global economy.

The most-traded June contracts on the SHFE were, for the most part, higher on Friday morning. The exception was aluminium, which was down by 0.3%, while the rest were up by an average of 1%, with Copper up by 0.1% to 73,260 yuan ($11,068) per tonne.

Precious metals
Gold prices were recovering, after recent weakness, and were up by 0.8% at $1,907.35 per oz. The rest were up by an average of 1%.

Wider markets
United States 10-year treasuries yields were firmer on Friday morning and were recently at 2.85%, having been 2.82% on Thursday’s close. The firmer tone, seems to reflect Friday’s general risk-on mood.

Asia-Pacific equities were stronger on Friday, following China’s stimulus rhetoric: the Nikkei (closed), the Kospi (+0.99%), the CSI 300 (+2.08%), the Hang Seng (+2.76%) and the ASX 200 (+1.06%).

The US Dollar Index is consolidating in high ground and was recently at 103.21, compared with a high of 103.95 on Thursday.

The other major currencies were consolidating in low ground: the euro (1.0541), the Japanese yen (130.28), sterling (1.2521) and the Australian dollar (0.7155). China’s yuan is consolidating this morning around 6.6186, from around 6.3600 in mid-April

Key data
Key economic data already out on Friday includes French consumer spending, which fell 1.3% month on month in March after a 0.9% rise in February; French gross domestic product (GDP), which was flat in the first quarter; and Germany’s import prices, which climbed 5.7% month on month in March, compared with a 1.3% rise in February.

Later, there is data on EU, French and Italian consumer prices (CPI); EU, Spanish, Italian and German GDP figures; EU M3 money supply and private loans data; and US data on core personal consumption expenditures CPI, employment cost index, personal income and spending, the Chicago purchasing managers index and the University of Michigan’s inflation expectations and consumer sentiment.

Friday’s key themes and views
China’s stimulus promises this morning have turned the market risk-on and that has lifted the metals, but some global companies are warning that they face supply headwinds, which is evidence of the impact of China’s Covid-19 lockdowns and the supply chain disruptions caused by Russia's invasion of Ukraine. There are now enough headwinds coming from different directions to be of given serious consideration. And the unusually sharp move in the yuan is another cause for concern.

Gold prices have rebounded and seem to be following the direction of the broader markets, although the data showing a downturn in US GDP and some sell-offs in some high profile US equities, may increase demand for haven assets.