Base metals prices on the London Metal Exchange were up across the board on the morning of Tuesday April 12, while those on the Shanghai Futures Exchange were mainly weaker, as they followed the weakness seen on the LME on Monday.
* United States 10-year treasuries yields continue to climb - and to weigh on market sentiment
* Today’s focus is on consumer prices (CPI) and their inflationary implications
* China’s Premier Li Keqiang has warned about the risks to economic growth for the third time in a week
Base metals
Three-month base metals prices on the LME were up across the board on Monday morning with gains averaging 0.7%, although this was after a negative performance on Monday when the complex closed down by an average of 2.1% - led by 4.4% fall in nickel and a 3.6% fall in aluminium.
On Tuesday morning most of the metals that are open are up between 0.8% and 0.9%, with tin the laggard with a 0.1% rise. Copper was up by 0.8% at $10,240 per tonne.
The most-traded May contracts on the SHFE were for the most part weaker, with the exception of zinc, which was up by 1.7%. The rest were down by an average of 0.7%, with copper down by 0.1% at 73,360 yuan ($11,519) per tonne.
Precious metals
The precious metals are on the climb, reflecting concerns about inflation and with the markets anticipating an escalation in fighting in the war in Ukraine. Spot gold was up by 0.3% at $1,956.61 per oz, while the rest of the precious metals were up by an average of 0.6%.
Wider markets
US 10-year treasuries yields have continued pushing higher and were recently at 2.82%, compared with 2.77% at a similar time on Monday.
Asia-Pacific equities were mixed this morning: the Nikkei (-1.81%), the ASX 200 (-0.42%), the Kospi (-0.9%), while the CSI 300 (1.37%) and the Hang Seng (+0.25%) bucked the trend.
Currencies
The US Dollar Index was driving higher on Tuesday and was recently at 100.15, compared with 99.93 at a similar time on Monday. The high on Friday, though, was 100.19. The next target is still likely to be the highs of 103-103.83 seen in 2017 and 2020.
With the dollar stronger, most of the other major currencies were weaker: the euro (1.0865), sterling (1.3011) and the Japanese yen (125.71), while the Australian dollar (0.7432) was treading water.
Key data
Key economic data already out today showed Japan’s bank lending rise 0.5% in March, after a 0.3% rise in February, with producer prices (PPI) in the country rising 9.5%, compared with 9.7% over the same period. German final consumer price index (CPI) was confirmed at 2.5% for March, after rising 0.9% in February. Germany’s wholesale price index climbed 6.9% in March, after a 1.7% rise in February. The United Kingdom’s employment report showed improved conditions.
Key data out later on Tuesday includes ZEW economic sentiment readings for Germany and the EU, US CPI and economic optimism readings from the Investor's Business Daily (IBD) and TechnoMetrica Institute of Policy & Politics (TIPP).
In addition, the US Federal Reserve's Federal Open Market Committee member Lael Brainard is scheduled to speak.
Tuesday’s key themes and views
Monday’s weakness in the base metals - which pulled most of the metals lower, with zinc being the least affected - has once again run into dip buying. While Covid-19 restrictions in China are likely to hit demand hard, the numerous factors affecting global supply chains are also reducing the availability of materials and goods where there is demand for them. While we remain generally bullish on the big picture outlook for metals - which include infrastructure spending, deglobalisation and electrification - near-term economic headwinds, including higher energy prices, inflation and rising interest rates, are getting stronger and that could lead to a temporary economic slowdown, or shock.
The fact gold prices have firmed in recent days and that is happening at the same time bond yields are rising (as is the dollar), which suggests gold is picking up haven demand in this inflationary environment where geopolitical risks are running high. Overall, we suspect the risk lies to the upside for gold prices.