Summary
- Markets grow increasingly reactive as the shutdown extends and data remain scarce.
- As spread tightness eases, LME prices normalise at current levels.
- Precious metals continue to draw strong inflows.
Macro
US equities opened firmer on Wednesday, approaching record territory once again and suggesting last week’s decline may have established a new support zone. With the government shutdown now in its fifteenth day, markets have lost reliable guidance from economic releases and instead are anchoring on trade flows and risk sentiment.The longer this standoff continues, the more sensitive markets become to unexpected data in either direction. Although a 50bps Fed rate cut is now fully priced in, any stronger-than-expected labour figures could easily unsettle markets, highlighting how fragile current expectations remain. Even with a 50bps cut fully priced in, market signals suggest lingering doubt. The 2-year/10-year yield spread remains near 50bps, indicating that investors are not fully convinced the Fed will deliver the full extent of easing expected this year. The dollar slipped today, breaking below 99.0, a move consistent with yield softness and the growing uncertainty around policy direction.
In China, September’s data added more cause for concern. Consumer prices fell by 0.3%YoY (versus a 0.4% drop in August), while producer prices declined by 2.3%, narrowing slightly from prior weakness. Although core inflation ticked up to 1.0%, it lacks the strength to offset broader deflationary pressure. The picture points to continued soft demand and industrial overcapacity. Even as Beijing leans toward further easing, the risk is that stimulus will struggle to translate into sustained growth. Meanwhile, President Trump and President Xi Jinping are set to meet in South Korea later this month, though the most likely outcome is a further delay in substantive progress on tariff negotiations.
Base Metals
Today, LME spreads continue to ease, with aluminium and zinc largely returning to pre-tightness levels. Copper, however, remains an exception, as its cash to 3-month spread remains backwardated, suggesting a period of relief rather than full normalisation. While much of the earlier stress was positioning-driven, copper retains residual tightness further along the curve, with supply disruptions such as Grasberg priced in. That structural tightness is now spilling modestly into the front dates, preventing a clean return to contango.
Despite easing spread pressures, price activity remains cautious, with metals normalising at current levels. Copper held its never above $10,600/t at $10,641/t as aluminium hovered around the $2,750/t level. Likewise, lead and zinc paused after yesterday’s weakness, settling at $1,982.50/t and $2,948/t, respectively.
While there is limited justification for outright market weakness, especially given prevailing physical tightness in copper further down the curve, we believe investors are likely to be more hesitant to force a decisive break above $11,000/t in the near term. This points to a more cautious trading environment, where the support at $10,500/t will serve as a critical reference for sentiment and conviction.
Precious Metals and Oil
Gold and silver extended their astonishing run. Bullion tested 4,200$/oz, while silver made up yesterday’s losses and traded above 52.6$/oz. Gold, traditionally viewed as a safe-haven in times of political and macro uncertainty, continues to attract flows. Silver, with its dual role as both an industrial and investment metal, appears caught in a speculative surge that may prove more volatile and less durable. With markets lacking fresh economic data, the Fed’s guidance at its next meeting becomes even more critical. While October’s 25bps cut is on the table, the probability of a further 25bps move in December is much less certain. Powell will need to cast a clearer signal for year-end so that markets can recalibrate without disorder. Our base view: just one more 25bps cut this year.
Oil prices held relatively flat, with WTI at $58.4/bbl and Brent near $62.0/bbl.
All price data is from 15.10.2025 as of 17:30