• Asia-Pacific equities weaker this morning.
  • Gold and the yen rallied on Thursday, and US treasury yields are weaker this morning – signs of a pick-up in haven demand.

Base metals
The base metals are down by an average of 0.9% this morning and the tone in the market has weakened. Thursday morning saw initial dip-buying after Wednesday’s weakness, but Thursday ended up seeing prices slump and there has been follow-through weakness this morning in quite high volume - considering China is closed - with 3,106 lots traded as of 6.10am London time.

Lead led on the downside with a 1.2% drop to $2,090 per tonne, aluminium is off by 1.1% at $2,827.50 per tonne and copper is down by 0.7% at $8,883.50 per tonne. All the metals are either testing the lows from mid-September, or in the case of lead and nickel have already fallen below their earlier lows.

Precious metals
Spot gold was down by 0.2% at $1,752.22 per oz this morning, but it and the rest of the precious metals rallied strongly on Thursday, closing with gains averaging 2.1%. This morning, silver ($22.01 per oz) and platinum ($959.20 per oz) are down by 0.5% and 0.4% respectively, while palladium ($1,911.20 per oz) is up by 0.1%.

Wider markets

The yield on US 10-year treasuries has pulled back again and was recently at 1.48%, having been as high as 1.55% on Tuesday.

Asia-Pacific equities were weaker on Friday morning: the Nikkei (-2.16%), the ASX 200 (-2.13%) and the Kospi (-1.59%), while the Hang Seng and CSI 300 were closed.

The US Dollar Index accelerated higher on Wednesday, paused on Thursday and was treading water this morning - it was recently at 94.29. Overhead resistance now lies in the 94.50-94.75 area.

The other major currencies were mixed: sterling (1.3459) and the Australian dollar (0.7213) were consolidating after weakness earlier in the week, the euro (1.1579) remains weak, and the Japanese yen (111.25) is firmer.

Key data
Friday has a busy economic agenda. Key data already in Japan out on Friday showed the unemployment rate dip to 2.8% in August, from 2.9% previously; the Tankan manufacturing survey for the third quarter climbed to 18, from 14; the final manufacturing purchasing managers’ index (PMI) for September was 51.5, down from 52.7 in August; consumer confidence for September climbed to 37.8, from 36.7; and German retail sales climbed by 1.1% month on month in August, after a 5.1% fall in July.

Later today, manufacturing PMI data is out across Europe and the United States. There is also data on European Union consumer prices as well as US personal consumption expenditures, personal income, personal spending, construction spending, ISM manufacturing prices, revised University of Michigan consumer sentiment and inflationary expectations and total vehicle sales.

Friday’s key themes and views
The sell-off is underway and given the headwinds that include the stronger dollar, the increased uncertainty in China about the impact of power shortages, higher energy costs around the globe and questions about the fallout from the Evergrande situation, market participants have a lot to think about. If equities sell off further, then we would expect that to weigh on the metals as well. But, as has been the trend for many quarters, we will have to wait to see if this dip once again attracts dip-buying.

Despite gold prices being lower this morning, Thursday’s broad-based weakness in base metals and equities did seem to spark some pick-up in haven buying, so we would not be surprised to see gold work higher again.