• Markets looking more nervous after concerted Western government sanctions on China have raised geopolitical tension.
  • Europe braces for further Covid-19 lockdowns

Base metals
LME three-month base metals prices were mainly weaker this morning, the exception was nickel that was up by 0.3% at $16,505 per tonne but it has been the weakest of the complex recently. The rest of the metals were down by an average of 1.3%, led by a 2.4% drop in aluminium ($2,218.50 per tonne), with zinc down by 1.9% ($1,972.50 per tonne) and copper off by 1.4% at $9,006.50 per tonne.

Volume on the LME so far this morning has been high with 18,666 lots traded as of 6.18am London time.

Similarly, the most active base metals contracts on the SHFE were for the most part weaker this morning, with the exceptions of June nickel that was up by 1.1% and May lead that was up by 0.8%. The rest were down by an average of 1.1%, led by a 3.1% fall in aluminium prices, while May copper was down by 0.1% at 66,770 yuan ($10,254) per tonne.

Precious metals
Precious metals prices were lower this morning, with spot gold prices off by 0.1% at $1,738.11 per oz, while the other metals were down by an average of 0.6%.

Wider markets
The yield on US 10-year treasuries was at 1.67% this morning, little changed compared with where it was at a similar time on Monday – the recent high was around 1.75%.

Asian-Pacific equities were weaker on Tuesday: the ASX 200 (-0.1%), the CSI 300 (-1.04%), the Nikkei (-0.61%), the Kospi (-1.01%) and the Hang Seng (-1.59%).

The US Dollar Index was weaker than of late this morning and was recently at 91.87, down from 92.10 at a similar time on Monday.

The other major currencies were mixed: the euro (1.1926) and the yen (108.71) were firmer, sterling (1.3841) was flat and the Australian dollar (0.7688) was weaker.

Key data
Tuesday’s economic agenda is busy, with data on UK employment and industrial orders, Chinese leading indicators and US data on the current account, new home sales and the Richmond manufacturing index.

In addition, there are numerous central bankers scheduled to speak including from the UK Monetary Policy Committee members Andy Haldane, Jon Cuncliffe and Bank of England Governor Andrew Bailey, while in the United States speakers include Federal Reserve Chairman Jerome Powel and Federal Open Market Committee members Raphael Bostic, Lael Brainard and John Williams.

Today’s key themes and views
The base metals have become more choppy in recent days, although the two metals that have shown most weakness in recent days, nickel and lead, have finally seen some lift after their recent weakness.

The underlying themes remain in place with economic recovery, stimulus spending, constrained supply chains and inflation all potentially bullish for commodity prices but there are potential headwinds, with the concerted Western actions and sanctions against China boosting geopolitical tensions, while bond yields are also a concern.

Gold prices got some lift in recent weeks, but they are encountering resistance around $1,750 per oz. With prices over $300 per oz below last year’s high, gold may well look like a cheaper haven should investors feel the need for one.