Summary
- Trump’s tariff delay and a record US trade deficit fuelled market uncertainty.
- ECB cut rates but signalled caution as Germany moves toward fiscal expansion.
- The current choppiness prevented markets from establishing long-term positions, intensifying volatility at the front end of the curve.
- A mix of fundamental and macroeconomic factors helped base metals break out of the prolonged ranges that had kept prices rangebound for months.
- Gold remained subdued as inflation concerns took a backseat despite tariffs.
Macro
US stocks opened lower but rebounded in early trading after President Trump announced a one-month delay on the planned 25% tariff hike on Canadian and Mexican auto imports. Together, these two countries account for around 40% of all US vehicle imports, making the postponement a key factor in today’s market sentiment. Meanwhile, trade data showed the US trade deficit widening to a record high in January as businesses front-loaded imports ahead of the anticipated tariffs. Imports surged by 10.0%—the biggest jump since July 2020—reaching $401.2 billion, while exports rose by just 1.2% to $269.8 billion. The sharp imbalance suggests that trade could weigh on US economic growth in Q1.
The dollar extended its recent decline, falling below 104.0, returning to levels last seen before the presidential election. In contrast, the 10-year US Treasury yield edged higher to 4.33%. In Europe, the ECB delivered a widely expected 25bps rate cut, but President Lagarde struck a notably firmer tone, suggesting a possible shift in the central bank’s stance. With Germany undertaking an ambitious fiscal expansion, the ECB may hold off on further easing to evaluate its economic impact. Meanwhile, EU leaders are preparing to ramp up defence spending and reinforce their support for Ukraine, as Trump’s suspension of US military aid raises concerns over Europe’s long-term security strategy.
Market performance has been choppy, driven not by sudden shocks but more so by conflicting narratives around trade announcements, EU defence spending structure, geopolitics, and central bank monetary policy. As a result, recent moves somewhat defied economic logic, with prices fluctuating between overbought and oversold conditions. This makes it difficult for markets to establish long-term positions, resulting in concentrated volatility on the front end of the curve.
Base Metals
Base metals tracked broader market volatility today, with a weaker dollar providing a boost. More notably, China’s potential move to cut steel supply amid domestic oversupply added fundamental support to prices. This suggests that while the demand outlook remains largely unchanged from last year, supply cuts may be necessary to help smelters restore healthier profit margins. Copper surpassed the $9,600/t level, reaching $9,734/t – a November 2024 high. Likewise, aluminium gapped higher on the open, ending the day near the $2,700/t resistance level. Nickel showed notable strength, breaking through a strong resistance of $16,000/t towards $16,300/t – also a November high. Lead and zinc made gains but lacked the appetite to break significantly higher, closing at $2,047.50/t and $2,929/t, respectively.
Precious Metals and Oil
Gold edged lower to $2,910/oz, pressured by rising bond yields, while silver slipped slightly to $32.6/oz. Oil prices stabilised after recent declines, with WTI at $66.0/bbl and Brent at $69.1/bbl at the time of writing.
All price data is from 06.03.2025 as of 17:30