• Enthusiasm over economic recovery sent United States treasury 10-year yields higher on Tuesday
  • China’s manufacturing purchasing managers’ index (PMI) climbs more than expected, while non-manufacturing PMI shoots higher
  • US President Joe Biden to announce massive eight-year infrastructure spending plans today

Base metals
LME three-month base metals prices were for the most part firmer this morning. Tin was the exception with a 0.4% fall to $25,130 per tonne. The rest of the complex were up by between 0.2% and 0.3%, showing a slight pick-up from the weakness yesterday when the complex was down by an average of 1.2%, with declines across the board.

Tuesday’s weakness on the LME has led to declines in the most-active base metals contracts on the SHFE. May lead is down the least with a 0.2% fall, while the rest are down by an average of 1.4%, led by a 2.5% fall in June nickel prices, while May copper is off by 1% at 65,670 yuan ($9,992) per tonne.

Precious metals
Precious metals were split with gold ($1,679.80 per oz) and silver ($23.88 per oz) down by 0.2% and 0.4% respectively, while platinum ($1,161 per oz) and palladium ($2,613.50 per oz) were up by 0.5% and 1.1% respectively.

Wider markets
The yield on US 10-year treasuries jumped to just shy of 1.78% on Tuesday afternoon, up from 1.64% on Monday. It was recently quoted at 1.74%, unchanged from where it was at a similar time on Tuesday morning.

Asian-Pacific equities were mainly weaker on Wednesday: the CSI 300 (-1.23%), the Nikkei (-0.82%), the Kospi (-0.11%) and the Hang Seng (-1.42%), while the ASX 200 (+0.78%) was stronger.

Currencies
The US Dollar Index remains bullish and was recently at 93.39, this after 92.97 at a similar time on Tuesday – this is the highest the index has been since mid-November 2020.

The other major currencies were mixed: the euro (1.1710), sterling (1.3724) and the yen (110.85) were weaker, while the Australian dollar (0.7600) was consolidating above last week’s low at 0.7522.

Key data
Key data already out Wednesday, in addition to the China’s PMI data, showed Japan’s housing starts fell 3.7% year on year in February, after a 3.1% decline in January.
Later there is data on the United Kingdom’s final gross domestic product (GDP), French consumer spending and consumer prices (CPI), German unemployment change and European Union and Italian CPI.

US data included ADP non-farm employment change, Chicago PMI, pending home sales and crude oil inventories.

Today’s key themes and views
The base metals are stuck in consolidation mode, but given Biden is about to announce massive stimulus aimed at US infrastructure, with China’s PMI pointing to recovery and with the International Monetary Fund expected to raise its global growth forecast, the path of least resistance for the metals should be to the upside, unless the good news is already baked in.

While we are bullish for the metals overall, we see potential downside risk coming from outside the metals markets. If equities start to suffer then that might well drag metals down too, at least initially.

Gold prices have all but given back the rebound gains of late, with this morning’s low so far at $1,677.95 per oz, while the low on March 8, was $1,677.10 per oz. The combination of rising bond yields and the dollar are dominating it would seem, but those two factors could also spell trouble for equities and emerging market debt, which in turn could lead to a pick-up broad market nervousness and in haven demand.