• Asian equities mainly lower this morning
  • Some disappointing manufacturing purchasing managers’ index (PMI) have raised concern about slowing economic growth

Base metals
LME three-month base metals prices were mainly weaker this morning; copper bucked the trend with a 0.5% gain to $9,666 per tonne, while the rest were down by an average of 0.8%.

Similarly, most of the most-active base metals contract on the SHFE were weaker this morning. The exception was September aluminium that was up by 0.9%, while the rest of the September contracts were down by an average of 1.5%.

Data released on Monday showed the Caixin manufacturing PMI slipped to 50.3 in July, which is getting close to the threshold of 50 that separates expansion from contraction, and may be raising questions about whether metals prices should be as strong as they are.

In addition, the spread of the Delta variant of Covid-19 in parts of China may well prompt fears of another wave of lockdowns that could affect manufacturing and logistics.

Precious metals
Spot gold and silver prices were down slightly, both off by 0.1% at $1,810.85 per oz and $25.32 respectively. Platinum ($1,056.10 per oz) and palladium ($2,685 per oz) were both up by 0.1%.

Wider markets
The yield on US 10-year treasuries has slipped further and was recently at 1.18%, compared with 1.23% at a similar time on Monday.

Asia-Pacific equities were mixed on Tuesday: the Nikkei (-0.5%), the Hang Seng (-0.39%) and the ASX 200 (-0.23%), while the CSI 300 (+0.05%) and the Kospi (+0.44%) bucked the trend.

Currencies
The US Dollar Index turned lower last week and is consolidating around 92.04, just above where it was at a similar time on Monday (92.01).

The major currencies were mixed this morning: sterling (1.3890) and the euro (1.1874) were consolidating, while the Australian dollar (0.7394) and the Japanese yen (109.13) were stronger.

Key data
Economic data already out on Tuesday showed Tokyo’s core consumer prices rose by 0.1% year on year in July, having been flat previously, and the country’s monetary base climbed by 15.4% in July from a year earlier, down from a 19.1% gain previously.

Later there is unemployment data out in Spain, the European Union’s producer price index, with US data on factory orders, economic optimism and total vehicle sales.

In addition, US Federal Open Market Committee member Michelle Bowman is scheduled to speak.

Tuesday’s key themes and views
Most of the base metals were either trending higher, or holding up in high ground, which suggests sentiment remains robust and the outlook remains positive. The fact this is the case in the summer lull, suggests the metals may just be treading water. Flagship copper has struggled more; it avoided breaking support in July, but the recent rebound has also paused. Given the overall strength of the complex and the fact that the Delta variant of Covid-19 seems to be spreading across communities that were not as badly affected in the first waves, we think puts mining at greater risk this time round and therefore concerns over supply are expected to remain in focus.

Gold prices lost upward momentum on July 30, with prices stuck in a sideways range now. For now, if lower treasury yields are due to increased haven demand, this is not showing up in gold yet.