• LME metals up by an average of 6.6% this week, with zinc up by 14%
  • Brent crude oil approaching $85 per barrel
  • EU passenger car registrations down by 23.1% in September, as chip shortages continue to bite
Base metals
LME three-month base metals prices were mixed this morning, with prices ranging between being up by 0.2% for copper ($10,016 per tonne) and down by 0.6% for lead ($2,285.50 per tonne). But, LME Week has seem prices generally march higher, with aluminium and zinc setting levels not seen since 2007-2008 and tin reaching a fresh record high, while lead, copper and nickel have recovered toward their summer highs.

It is not just base metals that are rallying strongly, however, with oil and many soft commodities - including cotton, coffee, cocoa, rice, palm oil and sugar - also on the rise. The arrival of a La Nina weather pattern across the equatorial Pacific is likely to disrupt weather patterns and affect crops.

While the LME prices are consolidating, the most-active base metals contracts on the Shanghai Futures Exchange were stronger across the board on Friday, with gains averaging 2%. Over the past week, these metals are up by an average of 5.2%, with Chinese metals generally starting on a strong note after the National Day holiday. On Friday, the November copper and zinc contracts led on the upside with gains of 2.8%, with copper at 73,840 yuan ($11,471) per tonne.

Precious metals
Spot gold was down by 0.2% at $1,792.49 per oz this morning. Silver was down by 0.2% at $23.46 per oz, platinum was unchanged at $1,058.20 per oz and palladium was up by 0.3% at $2,137.10 per oz.

Wider markets
The yield on US 10-year treasuries has been easier this week and was recently at 1.53%, down from 1.61% at the start of the week.

Asia-Pacific equities were stronger on Friday morning: the Nikkei (+1.68%), the Hang Seng (+1.29%), CSI 300 (+0.43%), the Kospi (+1.01%) and the ASX 200 (+0.69%).

Currencies
The US Dollar Index has pulled back to 93.92, down from 94.56 on October 12.

The other major currencies were mixed: sterling (1.3690), the euro (1.1612) and the Australian dollar (0.7431) have been getting some lift, while the Japanese yen (114.02) has weakened considerably.

Key data
Key data already out on Friday shows that Japan’s tertiary industrial activity fell by 1.7% in August, after a 0.6% decline in July.

Other key data out later today includes French consumer prices and the EU trade balance, along with US data on retail sales, the Empire State manufacturing index, import prices, University of Michigan consumer sentiment and inflation expectations, business inventories and the federal budget balance.

In addition, US Federal Open Market Committee member John Williams is scheduled to speak and the International Monetary Fund is meeting.

Friday’s key themes and views
Half the base metals have broken out of their long-held sideways ranges, suggesting a resumption of long-term upward trends. The other half, including copper, lead and nickel, are climbing strongly and may join the others in breaking higher. Whether a believer in the super-cycle or not, the latest action once again shows the dips are being seen as buying opportunities and we would say consumers are not looking to destock when logistics are snarled-up they way they are currently. In addition, if power rationing in China is targeting high energy users and high energy prices elsewhere are leading to lower production, then supply may well be constrained further. Likewise, with supply chains strained and shortages evident, pent-up demand will be building and the drop in EU auto sales attests to that.

Gold has rallied this week, no doubt helped by the weaker bond yields and dollar, although with the yen weakening, it does not look as though markets are seeking havens, but gold is also likely to be rising on the back of increasing inflation, especially with oil and other commodity prices also on the rise.