Summary
- With labour data slowing but still resilient and geopolitical uncertainty elevated, markets remain skewed towards reacting more aggressively to negative surprises than to upside data.
- Base metals weakened on profit-taking; tin, lead and nickel appear more prone to further catch-down should risk appetite continue to soften.
- Positioning-driven corrections are likely to persist in the near term, especially in silver, though structural support should limit downside beyond tactical retracements.
Macro
US equities opened mixed as investors focused on growing uncertainty around developments in Venezuela, alongside a softer-than-expected ADP Employment report. Private payrolls rose by 41k in December, undershooting forecasts but improving on November’s upwardly revised contraction. The data reinforce the view of a labour market that is slowing but not breaking, leaving investors cautious about extrapolating a single release. Attention now turns firmly to Friday’s Nonfarm Payrolls report, which carries greater weight for the Fed and is likely to be a key volatility trigger. With only one 25bps cut priced for the first half of 2026, markets remain asymmetric, reacting more forcefully to negative labour surprises than to incremental upside.
Rates reflected this dynamic. The 10-year Treasury yield briefly dipped below 4.13% on the release before quickly retracing, trading back above 4.15% at the time of writing. The dollar index oscillated around 98.6, suggesting consolidation rather than direction. We expect the dollar to remain range-bound in the near term, but increasingly sensitive to downside US data surprises, which would prompt a faster repricing of rate expectations than stronger prints would support.
In Europe, inflation data reinforced the view that the ECB is nearing the end of its easing cycle. Euro area headline CPI printed at 2.0%, in line with the ECB’s target, while core inflation softened to 2.3%. The combination strengthens market conviction that further rate cuts are unlikely, supporting a more stable rates outlook in the region.
Base Metals
Base metals sold off today, unwinding recent sessions of gains as markets faded recent highs amid increasingly stretched positioning. Copper weakened back below the $13,000/t mark as aluminium dipped below $3,100/t. Zinc corrected sharply towards $3,165/t. Realised volatility also picked up, as liquidity thins and short-term risk is reduced. While the pullback was sharp, the continued mirroring moves with precious metals suggests this is primarily profit-taking and position clean-up, rather than a major shift in the underlying trend.
Notably, nickel, tin and lead have held onto a larger share of this week’s gains, which may leave room for further catch-down if broader risk appetite continues to soften. As mentioned in our yesterday’s comment, copper and aluminium have a firmer support via expectations around AI-related infrastructure demand. Meanwhile, lead, nickel and tin appear more exposed to further mean reversion, particularly after outsized moves earlier in the week. In particular, nickel nearby spreads unwound sharply, pointing to easing tightness, which could keep rallies more prone to retracement in the near term.
Precious Metals and oil
In line with the broader pullback across base metals, precious metals also corrected after Tuesday’s sharp gains. Gold slipped back below $4,450/oz, while silver fell under $78/oz. The move reflects profit-taking after crowded positioning in a market where liquidity has improved slightly, rather than a deterioration in the underlying narrative. In the near term, we expect further two-way price action, particularly in silver, as elevated volatility leaves the complex prone to intermittent pullbacks. That said, dips are likely to be met with renewed buying interest as long as the broader allocation and structural support for precious metals remains intact.
Oil prices also moved lower, with WTI around $56.4/bbl and Brent near $60.2/bbl. The decline followed fresh headlines indicating that the US administration is planning to receive a large volume of Venezuelan crude shipments, potentially amounting to 50 millions barrels. While the announcement has weighed on near-term sentiment, we expect any meaningful impact on supply balances to take time, keeping crude prices sensitive to headlines but broadly range-bound for now.
All price data is from 07.01.2026 as of 17:30