• Today’s focus will be on the US employment report.
  • Market participants relieved that US Senate agreed to lift debt limit ceiling until December.
  • Oil prices and US treasury yields rise further.

Base metals

LME three-month base metals prices were mixed this morning: aluminium ($2,937 per tonne) and lead ($2,171 per tonne) were lower by 0.2% and 0.6% respectively, while the rest were up by an average of 1.2%. Although the gains were skewed by a 2.5% rise in nickel ($18,840 per tonne) and a 1.7% rise in tin ($35,900 per tonne), with zinc up by 0.6% at $3,078 per tonne and copper up by just 0.1% at $9,319.50 per tonne.

Volume has been strong too with 14,167 lots traded as of 5.50am London time, compared with a more normal amount of around 6,000 lots at a similar time of day.

The most-active base metals contracts on the SHFE were stronger by an average of 1.9%, led by 3.5% and 3.4% gains in the November contracts of nickel and tin respectively, with November copper up by 1.4% at 69,110 yuan ($10,716) per tonne. November aluminium was up the least, with a gain of 0.3%, but it has been one of the strongest metals of late, so does look relatively expensive.

Precious metals
Spot gold was up by 0.1% at $1,757.52 per oz this morning, silver was down by 0.5% at $22.47 per oz, palladium was down by 0.2% at $1,954.70 per oz, while palladium was up by 0.4% at $985.90 per oz.

Wider markets

The yield on US 10-year treasuries has pushed the envelope on the upside again and was recently at 1.59%, compared 1.54% at a similar time on Thursday and above Wednesday’s high at around 1.57%.

Asia-Pacific equities were mainly firmer on Friday morning: the Nikkei (+1.66%), the ASX 200 (+0.87%) and CSI 300 (+1.06%), while the Hang Seng (-0.01%) and the Kospi (-0.09%) were slightly weaker.

Currencies

The US Dollar Index was consolidating around the 94.28 level this morning, little changed from where it was at a similar time on Thursday – the range over recent days being 93.67-94.51. This is the highest range the dollar has held in about a year.

The other major currencies were mixed: sterling (1.3604) and the Australian dollar (0.7298) were firmer but consolidating, the euro (1.1549) remains weak, and the Japanese yen (111.91) has weakened further.

Key data
Key data already out on Friday showed Japan’s household spending dropped by 3% year on year in August, after a 0.7% rise in July, while the country’s economic watchers sentiment index climbed to 42.1 in September, after reaching 34.7 in August. Elsewhere, China’s Caixin services purchasing managers’ index (PMI) rebound to 53.4 in September after being at 46.7 in August.

Other key data out later in the United States includes the employment report and final wholesale inventories.

In addition, the Bank of England is set to release its quarterly bulletin, the Financial Policy Committee statement and recent meeting minutes.

Friday’s key themes and views

The fact China has managed to reopen in a buoyant mood despite the concerns about property companies’ debt and missed payments, combined with the US debt ceiling limit being extended until December, has provided some lift for equities and metals alike. Key now will be whether the US jobs report contains any bad news to dampen sentiment.

Gold seems stuck in sideways mode with the prospects of higher bond yields capping the upside, because they increase the opportunity cost of holding gold, while those fearing inflation, or increased market turmoil, provide support. A strong US jobs report that boosts yields and the dollar may be a problem for gold.