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Daily Base Metals Report

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US stocks closed the week on the back foot, taking back most of yesterday’s gains. US employment costs rose by more than forecast in Q4 2020, as worker pay increases accelerated. Meanwhile, US household spending fell for the second time in December, even as income rose with the pandemic bill coming in last month. The dollar weakened down to 90.452, and the 10yr US Treasuries yield strengthened up to 1.0791%. Elsewhere, Hong Kong economy contracted by a record 6.1% in 2020, falling by 3% in Q4. On the vaccine front, J&J one-shot vaccine shows 66% efficacy against the virus, raising hopes of another player in the market soon.

Metals on the LME came under moderate selling pressure today, with tin the worst affected, closing at $22,779/t. Protracted selling pressure in the second half of the day and a rejection of prices above $18,000/t caused nickel prices to close lower at $17,691/t. Lead was next in line as prices struggled above $2,050/t to close $2,024/t. Aluminium managed to find support at $1,975/t and closed at $1,977.50/t, with the cash to 3-month spread at $0.50/t. Copper tested support at $7,800/t to close at $7,856/t. Zinc was seen lower today, as it headed for its biggest monthly decline since February after rising stockpiles, closing at $2,579.50/t.

Oil futures were stronger today on the back of vaccine breakthrough. At the time of writing WTI and Brent trade at $52.50/bl and $55.99/bl. Precious metals strengthened today, with silver rallying by more than 3%, up to $27.33/oz, while gold is seen at $1,860.45/oz.

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.

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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.