Summary
- Stocks extended losses as markets brace for global fallout from tariffs.
- Base metals whipsawed as market stress carried over from Friday but eventually found stability later in the day.
- Gold pressured by forced selling; oil sunk on deepening recession fears.
Macro
US stocks opened lower today, mirroring declines in Asian and European markets. The 10% blanket tariff on all imports into the US, announced by President Trump, officially took effect on Saturday. Individualised reciprocal tariff on the countries with which the US has the largest trade deficits will take effect this Wednesday. As markets grapple with the fallout, concerns over a broad-based economic slowdown are mounting, particularly as global supply chains and export-heavy industries come under pressure. Investors are closely watching for signs of strain across the real economy, with volatility remaining elevated. The 10-year US Treasury yield jumped, testing 4.2%, reflecting rising uncertainty about inflationary pressures stemming from tariffs and potential disruptions to global trade. Meanwhile, the dollar index edged higher to 103.2, supported by safe-haven flows.
Base Metals
After last week's sell-off following tariff announcements, market sentiment remained weak. On Monday, copper experienced significant overnight volatility, dropping to $8,000/t before rebounding to $9,000/t and settling around the $8,732/t level. The decline in COMEX copper was much sharper than on the LME, erasing this year's gains in just three days. This overnight volatility and ensuing market stress resulted in dramatic swings across the entire complex. However, as the day progressed, prices began to stabilise, and markets started to deleverage positions. The uncertainty brought on by this market strain appears to be more damaging than the uncertainty caused by tariffs. As a result, it is difficult to accurately gauge the future direction of prices, with speculative noise clouding the fundamental picture.
Nonetheless, we expect that copper to continue influencing overall complex sentiment this week. To gain more clarity, we turn to the fundamentals, which suggest that the $8,800/t mark should act as a key support, as it closely aligns with the cost of production for many Chinese smelters. We anticipate this level will hold, provided there are no further retaliatory measures from the US's key trading partners.
Meanwhile, aluminium opened below the $2,400/t mark but struggled to maintain that weakness, marking the first day of gains since March 14th. The metal closed at $2,370.50/t. Likewise, nickel, which has remained below the psychological $15,000/t threshold since Friday, tested the lows below $14,000/t but struggled below it, prompting modest gains during the day to $14,364/t. Zinc managed to hold the $2,600/t support intact.
Precious Metals and Oil
Gold saw another day of losses, fighting to hold above the $3,000/oz threshold as forced selling from hedge funds to meet margin calls weighed on broader risk sentiment. Silver, however, managed to rebound, climbing back above $30/oz, after being heavily oversold in recent sessions—mirroring the recovery in copper. Recession concerns kept oil prices at multi-year lows, with WTI at $61.3/bbl and Brent at $64.9/bbl, as demand expectations weaken under the pressure of escalating trade hostilities.
All price data is from 07.04.2025 as of 17:30