Summary
- Global markets slumped as trade war escalated with China retaliating
- Base metals buckled under strong selling pressure today as markets reacted to China’s tariff retaliation against the US.
- Yields plunged while gold fell on profit-taking and margin calls
Macro
US stocks extended their decline today as markets continued to reel from the fallout of Trump’s recent tariff announcement. The UK and European equities followed the downward trend set in Asia overnight, reflecting widespread risk aversion. The monthly US Nonfarm Payrolls data came in significantly stronger than expected, with 228,000 jobs added in March versus forecasts of 140,000, but the release was largely overshadowed by the deepening trade conflict. China retaliated with a 34% tariff on all US imports and introduced restrictions on rare earth exports—fuelling concerns of a full-blown global trade war and stoking fears of a sharp economic slowdown. Investors rushed into safe-haven assets, driving the 10-year US Treasury yield below the key 4% mark for the first time in months. The dollar recovered modestly from yesterday’s steep losses, trading at 102.5 as 102.0 proved to be an unbreakable support level for now.
Base Metals
Panic selling hit the base metals market after China retaliated with a 34% tariff on all US imports and announced export restrictions on several types of rare earths. This move comes in response to the latest round of US tariffs, which raised duties on nearly all Chinese products to more than 50% - more than triple the level set during the Biden administration. The combined effect of China’s countermeasures and this week’s US announcements is only further undermining US economic prospects and injecting fresh uncertainty into bilateral trade flows.
Copper led the sell-off, weakening by over $600/t to $8,780/t – a level not seen since January. We view the $8,800/t mark as key support, as it closely aligns with the cost of production for many Chinese smelters. A sustained break below this level could further erode profit margins across the industry. The rest of the complex followed suit. Lead and zinc ended the week in the red, sliding to lows of $1,906/t and $2,657/t, respectively. Nickel tumbled, breaching multiple support levels to close the day at $14,758/t. Aluminium weakened for the 11th consecutive day, dropping below the $2,400/t level towards $2,78.50/t.
Aside from aluminium, most base metals have now retraced to January levels - when markets first began pricing in US tariff risks, particularly on materials from Mexico and Canada. With most of the tariff-driven speculative gains now wiped out, the outlook has effectively reset. One potential downside risk would be tariffs placed on the US from Canada and Mexico – both key exporters of base metals. However, since they were excluded from the US tariff measures in April, any response from their side appears unlikely. Given the scale of declines over the past few days, we believe the market would need a strong catalyst to push prices much lower from here. While some additional downside is possible, it’s likely to be limited without new trade disruptions — either from the US or directed at it.
Precious Metals and Oil
Precious metals, fell as investors liquidated positions to cover losses elsewhere. Gold dropped to $3,040/oz, while silver tested the $30/oz support level—its lowest since January. Oil prices also plunged to multi-year lows amid fears of weakening global demand. WTI fell to $62.3/bbl and Brent to $65.7/bbl, marking their lowest levels since 2021.
All price data is from 04.04.2025 as of 17:30