• China’s trade data showed imports and exports grew, highlighting broad-based economic recovery
  • Markets waiting for the release of United States consumer prices today and to see how that will affect bond yields

Base metals

LME three-month base metals prices were down across the board this morning, with prices down by an average of 0.3%, in what looks like further consolidation. The market may well be nervous about China’s renewed focus on high metal prices and how the authorities may try to tackle that. Copper was down by 0.4% at $8,833 per tonne.

The most-active base metals contracts on the SHFE were mainly lower, the exception was the May aluminium contract that was up by 0.7%, while the rest of the pack were down by an average of 1.2%, led by a 2.4% fall in June nickel. May copper was off by 0.2% at 65,940 yuan ($10,064) per tonne.

Precious metals
Spot gold prices were down by 0.4% at $1,726.42 per oz this morning, while the rest of the precious metals were little changed.

Wider markets

The yield on US 10-year treasuries has started to rise again and was at 1.69% this morning, up from 1.66% at a similar time on Monday – the recent high was just shy of 1.78% on March 30.

Asian-Pacific equities were mixed on Tuesday: the CSI 300 (-1.58%), the Nikkei (-0.2%), the ASX 200 (-0.04%), the Hang Seng (+0.31%) and the Kospi (+0.99).

Currencies
The US Dollar Index is consolidating around the 92.19 level having pulled back in recent days from an end-of-March high at 93.44. With US treasury yields firmer we wait to see if the dollar resumes its uptrend.

The other major currencies were also consolidating: the euro (1.1899), sterling (1.3750), the yen (109.60) and the Australian dollar (0.7609).

Key data

In addition to China’s trade data, the other key data set to be released today includes a barrage of data from the United Kingdom on construction output, gross domestic product, industrial and manufacturing production, goods trade balance and index of services.

Data out of Europe includes German wholesale prices, Italian industrial production and German and EU economic sentiment readings from Zentrum fur Europaische Wirtschaftsforschung (ZEW).

In the US, there is data on consumer prices and the small business index from the National Federation of Independent Business.

In addition, Federal Open Market Committee member Raphael Bostic is scheduled to speak.

Today’s key themes and views
With the exception of aluminium that is perched just below recent highs and is well placed to extend gains, the rest of the metals are looking less certain of their next direction. While we are bullish for the metals overall, we see a number of potential downside risks. Higher inflation readings look set to prompt the Chinese to tighten credit and if inflation is seen to be on the rise in the US, then bond yields may well rally further, which in turn could become a headwind for equities and if equities start to suffer then that might well drag metals down too, at least initially.

Gold’s latest attempt to rebound has run out of steam, but if other markets start to correct then gold may offer a relatively cheap haven.