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Daily Base Metals Report

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The stocks began this week on a down note after the sentiment in the market turned negative on the back of economic uncertainty. Investors sought the safe havens, pushing the 10-year Treasury yield down to 0.6838%. The dollar remained broadly unchanged, and Swiss franc and Japanese yen strengthened. While the economy is seen recovering, the main indicators remain weak, and we don’t expect international travel going back to pre-pandemic levels anytime soon. China’s industrial production and sales were at 4.4% y/y and -2.8% y/y respectively in May, both below expectations. To further aid economic recovery, Germany is planning to raise another $70bn in debt, the largest cumulative amount since WWII.

LME metal prices were mixed today; however, optimism faded from that of last week. Copper prices traded down to $5,670/t; however, support at this level triggered a close at $5,707.5/t. The cash to 3-month spread remains wide at -$28.75/t. Lead also lost some ground today but found support at $1,724/t to close at $1,738/t. Nickel started on the back foot; however, this afternoon, it traded back up through to a $12,741/t close. Aluminium remained broadly unchanged, testing the support level at $1,565/t and closing at $1,577/t. Tin prices were softer today, closing at $16,845/t.

Oil extended its losses on signs of the second wave of new coronavirus infections derailing the economy, exacerbated by Beijing closing the city’s largest fruit and vegetable market. Additional announcement by BP to write down the value of the business by $18bn reinforced the picture of continued turmoil in the industry. At the time of writing, WTI and Brent trade at $36.33/bl and $39.10/bl respectively. Precious metals were weaker today, moving in tandem with stocks, due to expectations of reduced consumer demand. At the time of writing, gold and silver trade at 1,719.80/oz and $17.26/oz respectively.

Disclaimer

This is a marketing communication. The information in this report is provided solely for informational purposes and should not be regarded as a recommendation to buy, sell or otherwise deal in any particular investment. Please be aware that, where any views have been expressed in this report, the author of this report may have had many, varied views over the past 12 months, including contrary views.

A large number of views are being generated at all times and these may change quickly. Any valuations or underlying assumptions made are solely based upon the author’s market knowledge and experience.

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COVID cases are rising across the globe as the delta variant spreads, this is causing some nervousness in financial markets, especially with the higher inflation rhetoric. Commodity prices have fallen since the Fed changed their tune inflation, the dollar has stabilised which has also been a headwind to prices. The summer months are traditionally quieter for metals demand which could prompt metals to consolidate. If the delta variant continues to spread, we may see higher levels of stimulus for longer. As things stand stimulus levels are set to be tapered and this could be brought forward if inflation remains high. We expect markets to remain volatile but on lower volume through the summer months.