• While some of China’s data shows a struggling economy, recovery and infrastructure spending elsewhere bode well for metals demand.
  • Western equity markets generally upbeat against relatively dovish central bank stances.
  • Direction of LME metal stocks and the low level of stocks in many cases also a pointer.
Base metals
Three-month base metals prices on the LME were weaker this morning, with the complex down by between 0.1% for nickel ($19,580 per tonne) and 1.6% for zinc ($3,239 per tonne), while on average the complex was down by an average of 0.6%, with copper off by 0.7% at $9,593 per tonne.

Conversely, most of the base metals contracts on the SHFE were firmer, the exception being December aluminium that was down by 0.1%. December lead was up by 0.1%, while the rest were up by an average of 0.7%, with copper up by 0.7% at 70,540 yuan ($11,027) per tonne.

Precious metals

Spot gold and silver prices were little changed at $1,823.44 per oz and $24.39 per oz respectively, but that was after seeing further gains on Monday. The platinum group metals (PGMs) were stronger this morning, with platinum ($1,053.90 per oz) up by 2% and palladium ($2,061.20 per oz) up by 1.6%.

Wider markets
The yield on US 10-year treasuries was unchanged at 1.47% this morning, the dovish central bank messages have sent money back into bonds, thereby lowering yields.

Despite fresh record highs on the Down Jones Industrial Average on Monday, Asia-Pacific equities were mixed on Tuesday morning: the Nikkei (-0.75%), the ASX 200 (-0.24%), the CSI 300 (-0.05%), the Kospi (+0.08%) and the Hang Seng (+0.16%).

Currencies
The US Dollar Index was consolidating recent strength this morning and was recently at 93.95, compared with 94.30 at a similar time on Monday - the index put in a fresh high for the year on November 5 at 94.64.

With the dollar pausing, the other major currencies were getting some lift: the euro (1.1597), the Australian dollar (0.7426), sterling (1.3573) and the Japanese yen (112.84).

Key data
Economic data already out on Tuesday showed Japan’s economic watchers sentiment climbed to 55.5 in October, after being 42.1 in September.

Later there is key data on German and French trade balances, European Union and German economic sentiment indicators from the Zentrum fur Europaische Wirtschaftsforschung (ZEW) and there is US data on the National Federation of Independent Business small business index and producer price index.

In addition, there are Economic and Financial Affairs Council (Ecofin) meetings and for the second day running a barrage of central bankers are scheduled to speak, including European Central Bank president Christine Lagarde, Federal Reserve chair Jerome Powell, Bank of England governor Andrew Baily, UK Monetary Policy Committee member Ben Broadbent and Federal Open Market Committee member Mary Daly.

Tuesday’s key themes and views

In line with us seeing the recent weakness as a correction within a bull market, Monday saw an attempt to arrest the slide in the base metals prices. Today, we wait to see if there is follow-through buying after the initial weakness. While China may have the brakes on, the rest of the world still looks structurally bullish, with infrastructure projects under way, shipping congestion and low stock levels affecting availability and central banks that seem to be in no hurry to raise interest rates.

The precious metals are looking stronger, with gold and silver challenging resistance levels and the PGMs getting some lift. The dovishness from the central banks, robust economic data outside of China and continued disrupted supply chains, suggests gold is once again focusing on inflationary pressures.