Summary
- AI-driven optimism continued to lift US equities into the weekend.
- Base metals ended the week on a more subdued note, with key support levels remaining intact.
- Precious metals traded quietly, reflecting limited market appetite for volatility.
Macro
US equities opened higher and closed October at another record high, with strong earnings from Apple and Amazon lifting the “Magnificent Seven” and, in turn, the S&P 500 to 6,850. Investor enthusiasm around AI-driven growth continues to support valuations across corporate America; however, we expect this momentum to moderate in the new year. Indeed, much of the AI-driven optimism appears to reflect current investment in infrastructure to meet surging demand, rather than broad-based maturity in monetisation. The current investment skew seems to be tilted toward future opportunities rather than fully realised profits. As a result, we anticipate returns on these investments to continue growing in 2026, albeit at a more measured pace. This suggests that US equities, having significantly benefited from AI-related tailwinds, could face a period of consolidation or a meaningful correction, particularly if concerns around the sustainability of current trends emerge.
Meanwhile, the Fed’s decision to cut rates by 25bps while cautioning against a potential cut in December has lifted the dollar index, pushing it towards the critical 100 mark – a high not seen since July. We believe that for the dollar to sustainably rise above this level, the markets must completely price out expectations of another Fed rate cut by the end of the year, which we believe to be unlikely in the near term, especially in the absence of labour market data.
Inflation in the euro area eased slightly in October, growing by 2.1% YoY, aligning with market expectations. While this figure is just above the ECB’s target, this data backed the central bank’s decision yesterday to keep rates unchanged, with an inflation flare-up becoming an unlikely scenario in the coming months.
Base Metals
As base metals gave back most of this week’s gains during Thursday’s session, today’s downside momentum appears to be easing. Despite softer Chinese macro data, today’s moderate price moves highlight the continued disconnect between fundamentals and market pricing, placing greater weight on speculative sentiment. Copper defended the support of $10,800/t, closing at $10,887.50/t by the end of the day, as aluminium held its nerve above $2,850/t. Likewise, zinc hovered around the critical $3,000/t level.
With the 2025 copper refined supply deficit narrative remaining intact, markets appear positioned for short-term upside spikes followed by healthy corrections, while maintaining underlying trend supports for aluminium, copper, and zinc intact.
Precious Metals and Oil
Precious metals ended the week on a more subdued note, reflecting market uncertainty over the next directional move after the recent sell-off. We maintain a constructive outlook for gold, supported by steady central bank and physical demand, which should help keep prices elevated. Silver, however, is likely to see greater near-term volatility as markets assess the potential for a decoupling from gold’s price trends. Oil futures jumped higher, escalating geopolitical tensions between the US and Venezuela, lifting WTI and Brent to $60.70/bbl and $65.00/bbl, respectively.
All price data is from 31.10.2025 as of 17:30