Summary
- Stock markets rebounded as doubts over Trump’s tariffs grew, weakening the dollar.
- Germany’s possible debt hike sent bund yields surging.
- Metals jumped higher due to several factors, including a weaker dollar, tightening COMEX/LME arbitrage, and possible tariff changes for Mexico and Canada.
Macro
US stocks opened slightly higher, tracking a rebound in European equities after yesterday’s declines. Markets appear to be discounting the impact of Trump’s tariff measures, which were largely priced in during Q4. While the 25% tariffs on Canadian and Mexican goods officially took effect on Tuesday, speculation around potential exemptions for certain imports has cast doubt on the full implementation of these trade restrictions. This scepticism is reflected in the sharp decline of the US dollar, which has plummeted over the past two days, now trading below 104.5. The euro was the strongest performer against the dollar today, with USDEUR tumbling to 0.928 following Germany’s decision to relax its borrowing constraints. The country announced plans to lift its constitutional "debt brake," which has capped the structural deficit at 0.35% of GDP—one of the lowest in the EU. The move comes in response to Trump’s recent pause on military aid to Ukraine, prompting Germany to ramp up defence spending. This shift triggered a historic rise in German bund yields, with the 10-year bund surging 17 basis points to 2.8%. Meanwhile, the US 10-year Treasury yield remained relatively stable, hovering above 4.2%.
Base Metals
Base metals opened on the front foot as markets responded to a range of news that injected significant uncertainty and volatility into broader markets. The continued sell-off of the dollar, combined with the expiry day and tightening conditions in the COMEX/LME arb, exerted upward pressure on copper, lifting the entire complex. In the second half of the day, momentum was further bolstered by the announcement that Trump might consider providing tariff relief for Canada and Mexico, two countries responsible for the majority of copper and aluminium imports into the U.S.
As a result, copper jumped above the $9,500/t level, reaching $9,585/t. Likewise, aluminium broke through the $2,600/t resistance, closing at $2,658..50/t. Lead broke above the $2,005/t mark, a level that had capped prices since the start of the year. In contrast, nickel struggled to break the $16,000/t level due to the scale of previous days’ gains.
We expect that much of today’s momentum was driven more by volatility than by a clear trend, suggesting that prices may find it challenging to achieve further gains tomorrow.
Precious Metals and Oil
Despite the dollar’s continued decline and broader market volatility, gold edged only slightly higher, trading below $2,930/oz at the time of writing. Silver, however, outperformed, rallying above $32.5/oz, supported by strength in base metals. Oil prices extended their losses, with WTI falling to $65.4/bbl and Brent declining to $68.5/bbl. The weakness follows OPEC+’s recent announcement to increase production starting in April, marking a shift from the prolonged output cuts that had been aimed at stabilising prices.
All price data is from 05.03.2025 as of 17:30