Summary
- Markets rallied as US–China tariff cuts lifted risk appetite and drove the dollar sharply higher.
- Base metals strengthened on the back of the US-China trade development, but the upside was capped by a combination of a stronger dollar and psychological resistance levels.
- Gold fell below $3,240/oz while oil extended gains on improving sentiment.
Macro
US equities surged on Monday following a breakthrough in trade negotiations between the US and China. The agreement entails a temporary 90-day reduction in reciprocal tariffs, with the US lowering duties on Chinese imports from 145% to 30%, and China reducing tariffs on US goods from 125% to 10%. The dollar index (DXY) climbed sharply, approaching 102.0, marking its strongest daily performance in over a month. This movement was driven by big losses in the euro (EURUSD down to 1.113) and the pound (GBPUSD softened to 1.2321), which together account for nearly 70% of the index's weight. Investor optimism led to a shift away from safe-haven assets, pushing the 10-year US Treasury yield above 4.43%.
Base Metals
Base metals responded positively to the recent trade developments between the US and China; however, a stronger dollar limited the gains on the LME. Copper is holding just above the $9,500/t mark but has struggled to break through the $9,582/t resistance level, which has constrained price increases in recent days. On the other hand, aluminium jumped higher, testing the $2,500/t resistance level before settling the day around the $2,480/t level. We believe that this resistance level is crucial for aluminium from a technical perspective; breaching it could spur a stronger risk-on appetite, particularly since aluminium has lagged behind copper and other base metals in recent months. Lead and zinc also opened higher, but technical resistance levels of $2,000/t and $2,700/t have halted the upward momentum. Meanwhile, tin successfully broke through the $32,000/t resistance to close at $32,574/t.
Precious Metals and Oil
Gold prices declined sharply, with the spot price falling to $3,235/oz, as demand for safe-haven assets waned. Silver experienced volatility but ultimately traded steady at $32.6/oz, aligning with its 50-day moving average. Oil prices continued their upward trajectory, with WTI and Brent crude rising to $62.5/bbl and $65.3/bbl respectively, as market sentiment improved.
All price data is from 12.05.2025 as of 17:30