Base metals prices on the London Metal Exchange were down across the board on the morning of Monday April 11, while those on the Shanghai Futures Exchange were more mixed.
* Rising US 10-year treasuries yields weighing on market sentiment
* China’s Covid-19lockdowns affecting logistics and demand
Base metals
Three-month base metals prices on the LME were down across the board on Monday morning with losses averaging 0.7%, although this was after a general day of gains on Friday. Copper was down by 0.7% at $10,267 per tonne, although volumes remained light, with 1,398 lots traded as of 6.33am London time.
The most-traded May contracts on the SHFE were mixed, with zinc up by 1% and tin up by 0.3%, while the rest of the complex was off by an average of 1.6%, led by a 3% fall in May nickel.
Precious metals
Spot gold prices were slightly weaker on Monday morning, off by 0.1% at $1,944.69 per oz, while the rest of the precious metals were up by an average of 0.2%.
Wider markets
US 10-year treasuries yields were pushing higher and were recently at 2.77%, their highest level since March 2019.
Asia-Pacific equities were mainly weaker this morning: the Nikkei (-0.83%), the Kospi (-0.31%), CSI 300 (-2.7%) and the Hang Seng (-2.71%) were all down, while the ASX 200 (+0.1%) bucked the trend.
Currencies
The US Dollar Index was holding on to recent gains on Monday and was recently at 99.93, compared with 99.84 at a similar time on Friday. The high on Friday, though, was 100.19. The next target is likely to be the highs close to 103-103.83 seen in 2017 and 2020.
With the dollar stronger, most of the other major currencies were consolidating in low ground: the euro (1.0890), sterling (1.2999) and the Australian dollar (0.7437), while the Japanese yen (125.25) continues to weaken.
Key data
Economic data already out today showed China’s consumer price index rising 1.5% year on year in March, up from a 0.9% rise in February, while producer prices climbed 8.3% in March, a slightly lower rise than February’s 8.8% increase.
Later on Monday there will be data on United Kingdom construction output, gross domestic product, goods trade balance, index of services, industrial production and manufacturing production.
In addition, the US Federal Reserve's Federal Open Market committee member Michelle Bowman is scheduled to speak.
Monday’s key themes and views
Base metals, for the most part, are treading water in high ground, albeit off the recent highs. The exception is aluminium, where prices have been under pressure for a while now - although weaker energy prices may be prompting a price correction. The Covid-19 lockdowns in parts of China are a double-edged sword in that while they are hitting demand, they are also disrupting logistics and that will hit supplies to the export market. While overall sentiment for the base metals generally seems supportive, the macro picture is looking weaker, with bond yield rises and the stronger dollar both acting as headwinds.
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, suggests gold is picking up haven demand in this environment that is inflationary and where geopolitical risks are running high. Overall, we suspect the risk lies to the upside for gold prices.