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Daily Base Metals Report

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US stocks edged higher today as recovery hopes stand firm, despite worrying increases in coronavirus cases across the world. We attribute this to investors’ belief that new virus outbreaks will not lead to the government shutting down the economy. The 10-year Treasury yields traded lower to 0.743%. Beijing continues to extend the curbs on movement to prevent a new outbreak, while in the EU, the treatment breakthrough instilled hope in the markets. UK inflation fell to 0.5%, y/y the lowest level since June 2016, as the pandemic and falling oil prices took a toll on the economy.

LME metal prices were well bid today as risk appetite re-emerged. Aluminium prices were firmer, however lack of appetite for prices above $1,615/t, triggered a close at $1,607.5/t. Lead prices broke through the resistance of $1,790/t and closed at $1,794/t. Zinc prices were also firmer and closed at $2,019.5/t. Cash to 3m spreads tightened slightly, with aluminium moving back into -$24.00/t, while copper and lead tightened to -$29.00/t and -$8.50/t respectively. Nickel prices opened on the front foot today, testing the $13,000/t resistance level, but saw stronger selling in the afternoon, closing at $12,871/t. Copper prices edged higher however remained mostly range-bound, closing at $5,770/t.

Oil futures declined, with WTI and Brent trading at $37.69/bk and $40.49/bl at the time of writing. Saudi Arabia, the biggest oil exporter, decided to stall its crude and natural gas deposit development as the coronavirus slows down demand. Iraq has cut its exports by 2% so far in June, making the country most likely to fall short of the OPEC+ target. Gold and silver were little changed, at $1,726.61/oz and $17.52/oz at the time of writing.


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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.