• Asia-Pacific equities weaker this morning as they followed Monday’s weakness in the United States.
  • Brent crude oil price back above $81 per barrel – adding to inflationary pressures.

Base metals

The LME base metals were down by an average of 0.3% this morning, led by a 0.7% decline in three-month copper that was at $9,207 per tonne. Nickel was down by 0.5% at $17,965 per tonne, this despite Vale halting output at its Onça Puma operation in Brazil, and zinc was off by 0.4% at $3,030.50 per tonne. The rest were either untraded or little changed.

Precious metals
Spot gold was down by 0.6% at $1,757.83 per oz this morning, while the rest of the precious metals were down by an average of 0.5%. The platinum group metals remain under pressure, no doubt not helped by the deteriorating auto production data. US total vehicles sales fell to an annualized rate of 12.2 million units in September, down from 13.1 million units in August and down from a more normal, pre-Covid-19 rate of either side of 17.5 million units.

Wider markets
The yield on US 10-year treasuries has edged higher again and was recently at 1.49% - the recent range having been 1.46% to 1.55%.

Asia-Pacific equities were weaker on Tuesday morning: the Nikkei (-2.4%), the ASX 200 (-0.41%), the Hang Seng (-0.02%) and the Kospi (-1.94%).

Currencies
The US Dollar Index was consolidating around the 94.02 level this morning, having been as high as 94.51 on September 30. For now, expectations for firmer monetary policy are outweighing concerns about the US debt ceiling being reached.

The other major currencies were mixed: sterling (1.3590) was consolidating after a strong rebound in recent days, the euro (1.1595) remains weak, while the Australian dollar (0.7256) and the Japanese yen (111.14) were consolidating.

Key data
Tuesday has a busy economic agenda, mainly with services purchasing managers’ index (PMI) data being released across Europe and the US.

Key data already out in Japan on Tuesday showed Tokyo’s core consumer price index (CPI) rose by 0.1% year on year in September, having been flat in August.

In addition to the PMI data, there is data on French industrial production, UK housing equity withdrawals, EU producer prices, as well as US data on the trade balance and economic optimism.

European Central Bank President Christine Lagarde and Federal Open Market Committee member Randal Quarles are scheduled to speak.

Tuesday’s key themes and views
With equities weaker and market participants concerned about when the US will start to taper, the markets are nervous and that means the metals are vulnerable. But for now, dips continue to find support, with the possible exception of nickel that seems to be struggling to hold up.

Overall, with constrained supply chains but with demand in recovery mode, we expect manufacturers will not want to be short of inventory.

With oil prices pushing higher and inflation on the rise, we would not be surprised to see gold work higher again, although in the short term it is still likely to be vulnerable if bond yields rise.