• United States treasury 10-year yields have pulled back from recent highs
  • Federal Reserve Chairman Jerome Powell said US economy at an “inflection point” with growth and hiring set to accelerate
  • Markets wary of US earnings season in case results do not meet expectations

Base metals
LME three-month base metals prices were down across the board this morning, with prices down by an average of 1.4%, led by a 2.7% fall in nickel ($16,170 per tonne) while lead ($1,967 per tonne) was off the least with a 0.3% fall. Copper was down by 1.2% at $8,822 per tonne.

The most-active base metals contracts on the SHFE were down by an average of 1.9%, with May aluminium and lead down the least with falls of 0.8% and 0.7% respectively, with June nickel down by 3.4% and May copper off by 1.7% at 65,700 yuan ($10,024) per tonne.

Precious metals
Precious metals were also weaker this morning, down by an average of 0.3%, with spot gold off by 0.2% at $1,739.66 per oz.

Wider markets

The yield on US 10-year treasuries has pulled back from recent highs and was at 1.66% this morning, down from a high just shy of 1.78% on March 30.

Asian-Pacific equities were mainly weaker on Monday: the CSI 300 (-1.58%), the Nikkei (-0.77%), the Hang Seng (-0.97%) and the ASX 200 (-0.52%), while the Kospi (+0.51%) bucked the trend.

Currencies
The US Dollar Index is consolidating around the 92.27 level having pulled back in recent days from an end-of-March high at 93.44.

The other major currencies were mixed: the euro (1.1887), sterling (1.3702), the yen (109.57) and the Australian dollar (0.7609).

Key data
Key data already out showed Japanese bank lending rose by 6.3% year on year in March, which was in line with expectations, the country’s producer price index climbed by 1% in March after a 0.6% fall in February, and preliminary machine tool orders were up by 65% in March, compared with a 36.7% rise in February.

Later there is data out on retail sales in the European Union and the US Federal budget balance.

In addition, Bank of England Monetary Policy Committee member Silvana Tenreyro is scheduled to speak.

Today’s key themes and views

The base metals remain stuck in consolidation patterns that are for most metals just below recent high ground, with lead and nickel being the exceptions in that their prices are consolidating further down from the highs. 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 once again bounced having found support in late March, as they did in early March, which suggests a base may be in place. If inflationary pressures start to rise and that prompts weakness in equities and bonds then the need for havens may well pick up.