The metals opened on a weak note yesterday but went on to climb albeit in quiet trading conditions.

By the close, the metals were up an average of 1.4 percent, having started the European session down around 0.6 percent. This move happened despite a generally firm dollar.

But the metals are under pressure this morning in Shanghai after the Shanghai Futures Exchange said it will raise margin requirements across the metals and increase daily price limits to six percent.

This, combined with the stronger dollar, has weighed on LME prices, which are down an average of 1.5 percent, led by zinc’s 2.7-percent move to $2,120 - lead is down 1.7 percent to $2,286 and copper is down 1.5 percent to $8,210.

LME Overnight Performance
  7:10 AM +/- +/- % Lots
Cu 8210 -129.75 -1.6% 3674
Al 2266 -23 -1.0% 633
Ni 22424 -226 -1.0% 169
Zn 2120.25 -59.75 -2.7% 4396
Pb 2286 -39 -1.7% 675
Sn 24100 -275 -1.1% 9
Steel Med 518 0 0.0% 0

Volume has also been heavy for copper and zinc at 3,674 and 4,396 lots respectively, so again we are tending to see larger volumes into price declines (see table on right for more details).

In Shanghai the March contracts are down an average of one percent, with copper down 1.3 percent at 61,670 yuan, zinc down 1.1 percent at 17,430 yuan and aluminium down 0.5 percent at 16,340 yuan. Spot Changjiang copper is one percent weaker at 61,500-61,750 yuan, which puts prices either side of the futures.

The LME/ Shanghai arb on copper is getting further from opening, with imported copper priced at a $375 per tonne premium, which suggests China continues to destock.

The dollar is stronger, with the dollar index at 80.05 - above the highs of recent days. The euro is at 1.3290, the pound is at 1.5710 and the Australian dollar is weaker at 0.9695 as is the yen at 83.90.

Gold is also weaker at $1,367 per ounce, which would suggest that geopolitical concerns have eased for a while and the stronger dollar is weighing on bullion prices. Oil is also weaker at $83.50 per barrel.

In equities, Europe was generally positive yesterday, with the FTSE showing a 0.75 percent gain (the US was closed for Thanksgiving), while Asia is weaker, with the Nikkei down 0.4 percent, the Hang Seng and China’s CSI 300 both down around 0.9 percent and the MSCI Asia Apex down 1.4 percent. So European equities are likely to start on the back foot.

Economic Agenda
Time Country   ACTUAL Expected Previous
Germany German Import Prices m/m -0.2% 0.2% 0.3%
All Day Germany German Prelim CPI m/m   0.0% 0.1%
7:45am France French Consumer Spending m/m 0.2% 1.5%
9:00am EU  M3 Money Supply y/y   1.3% 1.0%
9:00am EU  Private Loans y/y   1.4% 1.2%

Data out today concentrates on the EU, with German CPI and EU money supply (see table on right for more details) - trading in the US is likely to remain thin following yesterday’s Thanksgiving holiday.

On balance, weaker equities, a stronger dollar and continuing concerns over EU debt, plus generally weak chart pictures, suggest the metals may retest underlying support levels again.


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