US stocks picked up sharply, supported by positive corporate earnings results. US initial jobless claims fell to March 2020 lows of 293,000 in the week ending October 9, pointing to a continued recovery in the labour market. China factory gate prices grew by 10.7% y/y in September, a level not seen in almost three decades, as input prices, including power, soared; consumer prices, however, have grown below market expectations at 0.7% y/y – another sign of a stark difference between the pressures faced by consumer and producer sectors. US PPI rose by 8.6% y/y during the same period, but only up by 0.5% month-on-month, the slowest monthly rate since December 2020. The minutes from the Fed released on Wednesday confirmed the willingness of officials to taper in November-December.
Base metals surged on the LME yesterday, with zinc as much as $227/t, up to September 2007 highs of $3,637/t to close at $3,528.50/t. Aluminium tested the level at $3,174/t, managing close above $3,000/t at $3,117/t. Likewise, copper rallied, piercing resistance level of $10,000/t, but closing below at $9,984/t; cash to 3-month spread strengthened further up to $125/t – this strength of backwardation was last seen in June 2012. SHFE copper, however, softened on the day, closing at CNY71,810/mt; the next day trading started on the front foot at CNY73,520/mt. Nickel was supported above $19,000/t to close at $19,294/t. Five out of six base metals are in backwardations, signalling tight market conditions. Iron ore futures rebounded yesterday after two consecutive declines, closing at $123.58/mt. According to World Steel Association, steel demand should recover in 2022, despite the present challenges of higher energy prices, driven by growth outside of China.
Oil futures surged, with WTI breaking above $80/bl once again after the IEA report pointing to increasing demand for crude given shortages of natural gas in the markets. Brent traded at $83.49/bl. Precious metals were all seen marginally higher, with gold and silver trading $1,797.89/oz and $23.42/oz.
For more in-depth analysis of base and precious metals, please see our Quarterly Metals report.
All price data is from 14.10.2021 as of 17:30