(MB) Zinc was the best performer on the London Metal Exchange during morning trading on Friday August 31, with base metals prices on divergent paths despite positive data from China. The three-month zinc price was trading 1.6% higher as it recouped most of the Thursday’s losses with strong volume.
“Zinc’s improved micro dynamics has helped alleviate the downside pressure for now but the metal remains at risk of further downside if worries on emerging market currencies take center stage again,” Metal Bulletin analyst Andy Farida said.
The release of better-than-expected data from China is providing some support to the complex this morning. China’s official purchasing managers’ index (PMI) for the manufacturing sector edged up to 51.3 in August from 51.2 in July, after two previous months of decline.
Lead followed its sister metal higher, gaining $20.50 per tonne, while aluminium climbed 1%.
Aluminium prices are well supported by high alumina prices and on-warrant stocks being below 800,000 tonnes for the first time since 2007.
“With declining stocks, tightening spreads and the physical markets starting to wake up post the summer break, the picture looking forward is certainly interesting,” Kingdom Futures director and chief executive Malcolm Freeman said in a morning note.
“For now, it seems we will have to accept the illogical and the markets will just play a high volatility waiting game and today this is also despite good economic numbers from China,” he added.
The rest of the complex ignored the Chinese data release and continued a downward trend. Nickel prices were the worst hit, falling over $100 per tonne, while tin prices dropped below $19,000 per tonne.
“The moves can be explained/justified retrospectively but that doesn’t help us in the here and now as in truth we are dealing with random headlines that can change on a re-tweet,” Matt France, head of institutional sales at Marex Spectron, said.
“The size of the move yesterday will leave the market vulnerable to a reverse higher today should the macro support, but there was some real technical damage done to the complex and with month-end looming large we could yet see more pressure on the bid in the very short term,” he added.