Summary
- Wall Street sounds alarm about inflated equity valuations, leading to a decline in stocks at the market open.
- A combination of a stronger dollar and easing physical tightness drove copper lower; however, the pullback appears to reflect a healthy consolidation.
- Although precious metals remain below crucial psychological levels, the likelihood of further declines appears limited, suggesting a period of stabilisation.
Macro
US stocks gapped lower on the open after Wall Street executives sounded the alarm on the elevated equity valuations, triggering an early morning correction. However, the market managed to regain some momentum later in the day, with the S&P 500 inching back up to 6808. As mentioned in our previous comments, we believe that the current optimism surrounding AI is driven more by current investment in infrastructure to meet surging demand, rather than broad-based maturity in monetisation. This suggests that US equities could face a period of consolidation or a meaningful correction. For a correction to fully materialise, investors would need to lose confidence in the sustainability of current trends, which we believe to be unlikely unless tech companies report negative earnings or other adverse news. Instead, we anticipate that consolidation is more probable, with stocks remaining historically elevated in the near term.
Meanwhile, the dollar continued to strengthen, surpassing the crucial 100 mark after additional hawkish statements from Fed officials, putting the December cut under further scrutiny. Forward swaps are now pricing in a 71% chance of 17bps worth of cuts being implemented by the end of the year. While a break above the 100 level is psychologically important, we believe a stronger resistance is forming at the 100.20-100.30 level; a break above this could signal a potential medium-term recovery for the dollar.
Base Metals
Base metals weakened sharply this morning, led by copper, amid a firmer dollar and headlines around Codelco’s production outlook. While the Chilean miner revised its annual guidance lower to 1.31–1.34 Mt, the figure still sits above 2024 output levels, easing near-term deficit concerns that have underpinned prices since September. As a result, copper dropped to test the $10,600/t level before recovering slightly towards $10,663.50/t by the end of the day. The pullback in copper appears to reflect a healthy consolidation, with some excess momentum being unwound from the market, potentially offering some room for a modest rebound once positioning stabilises.
Likewise, aluminium gave up recent gains, dropping to just above the $2,850/t mark, maintaining its highs. Zinc rejected prices above $3,100/t, coming back to $3,088.50/t. Aluminium and zinc continue to hold above key support levels, suggesting that underlying fundamentals remain constructive and that both metals could see another leg higher should speculative interest return.
Precious Metals and Oil
Precious metals dipped slightly today but maintained recent support levels, indicating that the markets are stabilising at these points. Gold and silver are currently trading just below their respective psychological resistance levels of $4,000/oz and $48/oz.
Oil prices continued to soften as markets continued to digest the news of abundant crude supply following the announcement of the OPEC+ plan to pause production cuts.
All price data is from 04.11.2025 as of 17:30