Analyst Ed Meir looks at what is moving the metal markets on Tuesday May 1.
Copper and General Commentary:
Metals finished modestly lower on Monday in very quiet trading, with copper breaking a five-day winning streak.
We did not have much going on in terms of news except for a number of macro releases out of the US, which came in mixed.
On the negative side, business activity in the US, as measured by the Chicago purchasing managers’ index (PMI), decreased to 56.2, its slowest pace since November 2009 and coming in much lower than the 60 level expected.
On the positive side, both US consumer spending and incomes climbed in March; spending was up 0.3% after a revised 0.9% gain in the prior month, while incomes advanced 0.4%, the most in three months.
Right now, metals are mixed for a second day of uneventful trading as a number of markets, including China, are closed on account of the May 1 holidays. However, we did get China’s official PMI released overnight, which came in at 53.3, up from 53.1, although it fell short of the 53.6 forecast.
The manufacturing output sub-index component rose as well, but many individual sectors that make up the reading remain weak, among them chemicals, equipment, autos and oil refining. New export orders edged up to 52.2 from 51.9, but the sub-index for all new orders slipped to 54.5 from 55.1. Not surprisingly, the cross-currents evident in the report did not do much to boost the markets.
Elsewhere, the UK’s PMI dropped to 50.5 in April from a downwardly revised 51.9 in March, just a hair above contraction territory. Sluggish activity in Australia has also prompted the government to cut interest rates by an aggressive half point to 3.75%, sending the Australian dollar down to 1.033. Canada also said its economic output dropped by 0.2% in February from January, surprising analysts who had expected a 0.2% increase.
The bottom line that emerges from all these numbers is that we seem to be in a synchronized global slowdown, something that we expect will likely persist at least over the next few months. This will likely keep rallies in a number of commodities, including a number of base metals, somewhat in check.
Later in the day, we get the April ISM numbers out of the US (expected at 53, lower than last month’s 53.4), March construction spending (expected at 0.5%), as well as April auto and truck sales.
Technically, we are now at $8,413 on copper, up $11, and nearing the earlier intraday high of $8,450. LME stocks continue to decline, off another 6,800 tones overnight and continuing to keep the spreads wide. Cash/may is now at +$70/75 with tom/next trading at $20 back. May/June and June/July are at $30 back and $16 back, respectively. Index rolls start next week.
Ali is now at $2,116, down $2; there is some resistance at $2,125, which was tested earlier today, while more substantial resistance is at $2,200. We likely will be pushing higher from here given the chart picture.
Zinc is at $2,068, up $5 and fairly quiet today with an $18 trading range in place.
Lead is at $2,167, up $19 and pushing towards next resistance at $2180.
Nickel is at $17,621, down $274, and not participating in the stronger tone we have seen in most metals over the past week.
Tin is at $22,750, down $25.