Summary
- US stocks failed to post new highs, as AI-related deals did little to lift overall risk sentiment.
- As copper’s recent shine fades, aluminium and zinc emerge as key alternatives for capital rotation.
- Gold and silver stabilised despite news of China ending tax rebates, suggesting precious metals are establishing new support levels.
Macro
US stocks gapped higher on Monday, largely driven by Amazon's deal with OpenAI, which boosted early-morning market sentiment that AI tailwinds have supported. However, declines in other sectors quickly reversed this optimistic sentiment, pushing the S&P 500 back to Friday's closing level of 6,850. This suggests that the gains driven by AI are starting to lose significance, especially as earnings season comes to a close. With indices remaining at record highs, technical resistance appears to be forming at these levels as equity valuations once again approach stretched territory.
With the US government shutdown now entering its second month, markets are likely to draw macroeconomic insights from private sector data and PMIs regarding the Fed's December decision. However, we do not anticipate significant changes in cut expectations, as policymakers do not typically use this data to inform their decisions.
Base Metals
As the copper shine began to fade last week, markets shifted their focus to aluminium, which attempted to break above the $2,900/t mark once again today, closing at $2,902/t. The easing of tariff tensions between China and the US, along with the impending production cap in China, is providing stronger support for the metal. However, we attribute much of today's strength to a rotation of investor exposure within the base metals complex, with capital moving into copper's close substitutes. A combination of these factors suggests that aluminium may reattempt to breach the $2,900/t resistance level. However, a sustained move above $3,000/t would likely require a meaningful improvement in physical demand - something we do not expect in the near term.
Elsewhere, zinc spreads remain tight in backwardation, which is set to keep prices elevated. Zinc has jumped higher to test the key $3,100/t resistance, closing at this level. Lead has also increased, strengthening to $2,027/t.
Precious Metals and Oil
Gold opened lower this morning after China ended a tax rebate for some retailers who sell gold they purchased from Chinese exchanges. Gold has subsequently bounced back, stabilising around the $4,000/oz level. This indicates that precious metals are establishing new support after the recent unwinding of speculative positions. Silver hovered around the $48.50/oz mark.
Oil futures jumped higher at the market open following the announcement that OPEC+ is planning to pause its output increases in Q1 2026. However, prices later stabilised, with WTI and Brent ending the trading session close to $61.30/bbl and $65.00/bbl, respectively.
All price data is from 03.11.2025 as of 17:30