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Daily Base Metals Report

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US stocks declined as investors assessed the economic data coming out of the US and China. The NY state manufacturing activity declined unexpectedly in May, down to -11.6, however did not fall below the March levels. The dollar softened slightly, and the 10yr US Treasury yield remained at 2.85%. Meanwhile, the Chinese economy weakened significantly in April, exceeding market expectations. Retail sales contracted by 11.1% y/y, much weaker than the expected 6.6% decline and the worst level since the pandemic began. Industrial production fell 2.9% y/y.

Mixed performance on the LME today despite negative data releases coming out of China. We suspect that the positive sentiment for some metals has been driven by the investor expectations of government stimulus soon, given the weak economic backdrop. However, from the monetary policy side, the interest rates remained unchanged, highlighting the policymakers’ concern surrounding the currency and capital flows. In the meantime, Shanghai is on the brink of meeting the target of zero covid cases for three consecutive days in order to have its restrictions lifted. Indeed, the city bore the brunt of the covid outbreak, with the SAAA reporting that not a single car has been sold in the city during the last month. Aluminium and copper were moderately on the front foot, with metals closing marginally higher at $2,832/t and $9,238.50/t. Copper cash to 3-month spread tightened, increasing up to $50.00/t, the levels not seen since late February. Zinc saw the strongest gains, gaining footing above $3,560/t to close at $3,563.50/t. Nickel was the only one down on the day, declining for the 5th straight day to close at $26,549/t.

Oil futures fluctuated, with WTI and Brent trading at $111.77/bl and $112.24/bl. Germany stated its intention to end Russian oil imports by the end of the year even if the EU is unable to reach a bloc-wide ban. Precious metals were also mixed, with gold remaining broadly unchanged while silver increased to $21.43/oz.

For more in-depth analysis of base and precious metals, please see our Quarterly Metals report.

All price data is from 16.05.2022 as of 17:30


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