• Asian Pacific equities were mixed this morning, as were major western equity indices on Tuesday…
  • …but major western equity indices are weaker this morning, suggesting some concern about the spread of the virus

Base metals
Three-month base metals prices on the London Metal Exchange were mixed, with aluminium off by 0.1% at $1,981 per tonne and with copper little changed at $7,077 per tonne. Lead was off by 0.3% at $1,943 per tonne and nickel was down by 0.7% at $15,790 per tonne. But, zinc and tin remained strong with gains of 1.3% and 0.6% at $2,735.50 per tonne and $19,110 per tonne respectively.

The most-traded base metals contracts on the Shanghai Futures Exchange were more polarized with the December contracts for zinc and aluminium up by 2.3% and 2.1% respectively, the January tin contract up by 1.6%, while February nickel was down by 1.2%, December lead was off by 0.1% and December copper was down by 0.3% at 52,690 yuan ($8,025) per tonne.

Precious metals
Spot gold prices were down by 0.2% at $1,878.40 per oz, silver was down by 0.1% at $24.45 per oz, while platinum was unchanged at $929 per oz and palladium was up by 0.3% at $2,323 per oz.

Wider markets
Risk-off appears to be mounting with the yield on US 10-year treasuries falling again, it was recently quoted at 0.84%, this after 0.91% at a similar time on Tuesday and being as high as 0.98% at one stage last week.

Asia-Pacific equities were mixed this morning: the ASX 200 (+0.51%), the Hang Seng (+0.16%), the Kospi +0.26%), the Nikkei (-1.1%), and CSI (-0.45%).

The US dollar index is drifting lower and was recently quoted at 92.36, this after 92.56 at a similar time on Tuesday – support is seen between 92.13 and 91.73.

While the dollar drifts, most of the other major currencies have been edging higher in high ground as was the case in the euro (1.1873), sterling (1.3257) and the yen (104.01), but the Australian dollar (0.7291) has been weaker.

Key data
There is a busy economic agenda on Wednesday, starting with a barrage of pricing data in the United Kingdom including the consumer price index (CPI), see table below. There is also CPI data out of the European Union, with US data on housing starts, building permits and crude oil inventories.

In addition, UK Monetary Policy Committee member Andy Haldane and US Federal Open Market Committee member John Williams are scheduled to speak.

Today’s key themes and views
While the overall upward trends in the base metals continue, it does seem as though the market remains bullish about potential demand from infrastructure projects. But, governments’ ultra-loose monetary policy and fiscal support have no doubt driven hot-money into these markets and will those investors have the patience to hold on to their positions until the metal is actually needed.

There is a considerable time delay between when the notion of spending on infrastructure projects is announced and when actual demand is generated. While we remain bullish we are concerned prices may have run ahead of the fundamentals.

Gold is looking vulnerable; prices are back in the sideways-to-down channel that started off the August highs and prices are not getting much lift of the back of the weaker dollar and on the strength in other commodities. Will prices take note of the weaker treasury yields? If not, then that is another cause for concern.