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Daily Base Metals Report

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US stocks declined on the back of softening data coming from the US and China – another round of signs of global growth easing. The NY manufacturing gauge declined sharply in July, experiencing one of the sharpest declines since 2001, as orders and shipments slumped further. US homebuilder confidence declined for the 8th straight month, the longest month-on-month decline since 2007, amid high borrowing costs and elevated house prices. The dollar edged higher to 106.25, and the 10yr US Treasury yield settled at 2.77%. The 3-month and 10-year spread has been testing the 0.00 level but is yet to flip into the negative, suggesting the US recession is not yet imminent. Elsewhere, in Europe, the probability of a technical recession reached 60%, the highest level since November 2020, according to a Bloomberg survey.

China’s data pointed to slower than expected growth figures in July, and the LME market responded with a moderate contraction today to reflect the souring sentiment. Industrial production increased by 3.8% y/y, down from 3.9% in June and a forecast of 4.3%. Retail sales grew by 2.7% y/y, and fixed-asset investment gained 5.7%. The nation’s commitment to zero covid cases meant that regional flare-ups led to a partial curtailment of activity and mobility, stifling the potential for a smooth recovery. In response to the slowing macroeconomic outlook, the PBOC has cut its key interest rate and withdrew some liquidity from the banking system. Nickel sold off by more than 4.5% as it fell below the support level of $22,000/t to close at $22,013/t. Next in line were aluminium and copper, which fell marginally to close at $2,390/t and $X/t, respectively. Zinc weakened strongly at the start of the day to settle higher at $3,563.50/t. Iron ore declined by 4.6% back down to $106.05/mt, where it has found support so far today.

Oil futures followed the general trend, as a potential breakthrough in Iran negotiations could ease the global supply pressures, falling to $88.44/bl and $94.29/bl for WTI and Brent, respectively. As natural gas prices continue to soar, the EU’s power prices continue to grow, jumping to a fresh record high, causing some economies, such as Germany, to increase levies on households to ease the mounting costs. Gold and silver weakened into $1,779/oz and $20.28/oz.

For more in-depth analysis of base and precious metals, our Q3 2022 Quarterly Metals report is out now!

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