Base metals round up (BHP,KAZ,GLEN)

Wednesday, 9th January 2019 13:08 - by Rajan Dhall

As the trade negotiations continue between China and the US any good news is followed by a rally in copper prices. This morning, copper is trading at $2.66/lb - this is after we tested the consolidation low of around $2.52lb recently, following weeks of limited progress in the trade talks. This morning, the rhetoric around the latest round of negotiations has all been positive with Ted McKinney, under Secretary of Agriculture for Trade and Foreign Affairs put it succinctly in that he believed they 'went just fine' and that it has been 'a good one' for the US. President Trump was also quoted in financial media yesterday, suggesting he wants a trade deal as soon as possible in order to boost financial markets.

Trump seems to have lost some of his bargaining power recently as the data in the US seems to have turned and the stock markets are looking weary. The S&P 500 sold off during the festive period as the Federal Reserve (US central bank) increased interest rates in December. They have since 'backed off slightly' through dovish rhetoric, with Jerome Powell saying they will consider market conditions before moving again. Trump, however, knows he needs strong markets in the US as a tool for negotiations as the Chinese economy looks to be faltering too. Manufacturing and industrial data has slowed which has also sent base metals lower.

Looking ahead if you trade UK base metal stocks like Kaz, Glencore, BHP etc. keep an eye on the news from the trade war as it will have a direct impact on base metal prices and profits for the miners. There may be a somewhat lagging effect on revenues during earnings season as the reported earning will be in times when prices were low. The market usually 'prices in' commodities price rises, so any opportunity earnings present may be good value.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.