• Brent crude oil is back above $70 per barrel, the highest it has been for two years. 
  • Tuesday’s manufacturing purchasing managers’ index (PMI) data for the most part showing economic strength. 
  • Broader market waiting for Friday’s US employment report.

Base metals
LME three-month base metals prices were split, with copper ($10,238 per tonne), aluminium ($2,470.50 per tonne) and lead ($2,196 per tonne) showing weakness and a loss of upward momentum, while nickel ($18,175 per tonne), tin ($30,870 per tonne) and zinc ($3,088 per tonne) were showing strength, with the latter two looking more robust than the rest

The most-active SHFE base metals contracts were also mixed, like on the LME, zinc and tin were firmer by 1.2% and 0.3% respectively, while the rest were down by an average of 0.7%. July copper was down by 0.4% at 73,690 yuan ($11,534) per tonne.

Precious metals
Spot precious metals were little changed and generally weaker; the exception was platinum which was up by 0.1% at $1,187 per oz. The rest were weaker by between 0.1% and 0.3%, with gold down by 0.1% at $1,898.08 per oz - this after Tuesday’s high of $1,916.55 per oz.

Wider markets
The yield on US 10-year treasuries was recently quoted at 1.61%, this after a high on Tuesday of around 1.64%.

Asia Pacific equities were mixed on Wednesday: the Nikkei (+0.46%), the ASX 200 (+1.05%), the Kospi (+0.07%), the Hang Seng (-0.65%) and the CSI 300 (-0.94%).

The dollar index seems to have been bouncing along the bottom over the past week and was recently at 90.00, after lows of 89.66 on Tuesday and 89.53 on May 25.

With the dollar consolidating, most of the other major currencies were slightly weaker this morning: sterling (1.4145), the Australian dollar (0.7732), the yen (109.75) and the euro (1.2208).

Key data
Wednesday’s economic agenda is busy. Key data already out showed that German retail sales fell 5.5% in April, after a 7.7% rise in March.

Later there is data on Spain’s unemployment, an update on lending in the United Kingdom, EU producer prices, US data on economic optimism, total vehicle sales and the Beige book.

In addition, Germany’s Bundesbank president Jens Weidmann and Federal Open Market Committee members Raphael Bostic and Charles Evans are scheduled to speak.

Today’s key themes and views
The base metals are for the most part holding up in high ground, but it is tin and zinc that seem to have the momentum to extend gains, while nickel seems to be playing catch-up having underperformed since February’s setback. Copper, aluminium and lead seem to have lost upward momentum for now.

The overall trends, however, are bullish, there is the prospect of ongoing recovery from lockdowns and supply disruption from delayed shipping and potential strikes. But as economic data improves, the market may well get more nervous about central bank tightening and that could spook equity and bond markets. Corrections there would likely impact commodity markets too. As such, we think the markets will focus more on the economic data for short-term direction.

Gold’s uptrend is looking strong, prices are pausing for now, but given the inflationary backdrop and potential for increased volatility in markets, we think gold will remain well supported.