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Daily Base Metals Report

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US stocks rallied today, hitting a one-month high, on the hopes of progress in developing a coronavirus vaccine. Both industrial production and empire manufacturing activity improved in June, up 5.4% m/m and up to 17.2, respectively, aiding the rally.  The dollar weakened to a one-month low, and 10Y yield of Treasuries softened. The People’s Bank of China trimmed liquidity as concerns over asset bubble grow, signalling the government’s cautious approach to post-COVID recovery. The UK to set a ban on Huawei from country’s 5G network, as it poses an “unsafe security risk”.

Sentiment on the LME was weaker today, with only zinc and lead marginally higher. Aluminium was well supported today, however, lost ground in the second half of the day, closing above the new-found support level of $1,680.00/t at $1,683.50/t. Nickel prices were supported below $13,500.00/t and closed at $13,528.00/t. Copper came under strong selling pressure, closing near the day’s lows at $6,386.00/t. Aluminium cash to 3-month spread widened to -$32.00/t contango, and tin tightened to -$8.00/t. Lead and zinc remained mostly range, closing marginally higher on the day, at $1,844.50/t and $2,200.50/t respectively.

Oil gained after a report pointed to a drop in US stockpiles, but gains remain capped as OPEC+ is set to ease cuts, with WTI and Brent up to $40.71/bl and $43.34/bl respectively. Gold and silver were higher on the day, trading at $1,810.93/oz and $19.32/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.