Base Metals Receive Boost from China’s Trade Data

The Chinese economy, which is the world’s second-largest economy, has yet released another trade data that shows Australia’s No. 1 trade partner had a dropping 4.4% in exports year over year in July. A slide of 3.5% was expected, but the eventual outcome proved to be at least better than the 4.8% seen beforehand. The more disappointing data for Australia is their recent deep slump in imports: 12.5% y/y against 7% expected and 8.4% previously. Australia exports iron ore and other metals to China. The fall does not send a good vibe about the Australian mining sector.

The Chinese economy is actively migrating away from industry and investment as they will subsequently move into consumption and services. However, the transition will most likely take a while. As Australia is also moving away from its dependence on extracting metals, the switch here is also a work in progress.

Nevertheless, the Chinese publication did not seem to hurt the Aussie Dollar too much. With the AUD/USD initially maintaining a range but never falling below it. Perhaps the effects of China on Australia is waning. The RBA cut interest rates but signaled that no new moves are coming in the near future. We still have more data coming out from China this week, hopefully they give us hints as to what we should expect.

Base metals edged slightly higher on Friday, with the exclusion of Copper and Lead, the complex grew 0.6% higher on average, and all other base metals showed gains and moved to end the week in the green. A mixture of the consequential upward revision carried out on the Atlanta Fed GDP growth forecast for the third quarter and the US job report released last Friday led to a major increase in risk-sentiment for investors to adopt a bullish stance for the majority of base metals.

Meanwhile the precious metals complex suffered a slump, mostly as a result of the current strength of the US Economy, which has led traders and investors to anticipate a more hawkish side from the Fed and also a fitting response from the Fed fund rates decision, this should be the direct implication of the rise in the dollar and the US real rates. All precious metals ended up closing in the red last week.

Precious metals have today been receiving moderate gains, as the entire complex has managed to climb 0.2% in average. In today’s morning trade session, base metals on the London Metal Exchange are making their way higher amidst rather modest volumes. With the exclusion of tin, the rest of the precious metals complex is on the rise, as nickel leads the list of the complex’s gainers, rising 0.7%.

The October base metals contracts are pricing at significantly stronger levels, with the entire complex currently averaging 1.1%. Nickel is also the top gainer here climbing 2.2%, copper is at the bottom of the gainers list showing a 0.3% positive change. Meanwhile, spot copper in Changjiang is edging 0.1 percent lower at 37,520-37,670 yuan, while the contango with the futures is at $17.99 per tonne, and the LME/Shanghai copper arb ratio is slightly higher from Friday at 1:7.79.