- While lockdowns can hit demand, there is also a risk to supply from mine closures or further logistical delays
LME three-month base metals prices were down across the board on Tuesday by an average of 0.6%. These were led by a 1% fall in copper ($9,289 per tonne), with lead ($2,242 per tonne) little changed.
The most-active SHFE base metals contracts were also down across the board by an average of 0.8%, led by a 2.1% fall in August nickel, with August copper down by 1% at 67,780 yuan ($10,494) per tonne.
Spot precious metals were little changed this morning, gold was up by $0.60 per oz at $1,778.25 per oz, while silver ($26.10 per oz) and platinum ($1.092 per oz) were both unchanged and palladium ($2,675 per oz) was down by 0.3%.
The yield on United States 10-year treasuries has slipped again and was at 1.48% on Tuesday morning, down from 1.53% at a similar time on Monday.
Asia-Pacific equities were weaker on Tuesday, this despite fresh record highs on the US S&P 500 and Nasdaq on Monday: the Nikkei (-0.93%), the ASX 200 (-0.13%), the Kospi (-0.54%), the Hang Seng (-0.93%) and the CSI 300 (-1.14%) – we think this reflects increased concern about the rapid spread of the Delta variant across Southeast Asia and parts of Australia.
The US Dollar Index continues to consolidate. It was at 91.93 on Tuesday morning, little changed from 91.83 at a similar time on Monday.
Most major currencies were mainly consolidating this morning on a back foot: the Australian dollar (0.7562), the euro (1.1919) and Sterling (1.3872), while the Japanese yen (110.56) was slightly firmer.
Data already out on Tuesday showed that Japan’s unemployment rate climbed to 3% in May, from 2.8% in April, and retail sales grew 8.2% in May, which was in line with expectations.
Later there is key data on German and Spanish consumer prices (CPI), United Kingdom lending, mortgage approvals and M4 money supply, with US data on house prices and consumer confidence.
US Federal Open Market committee member Tom Barkin, European Central Bank president Christine Lagarde and Germany’s Bundesbank president Jens Weidmann are scheduled to speak.
Tuesday’s key themes and views
The base metals are looking quite mixed; flagship copper is looking vulnerable after only a limited rebound at the start of last week, while the rebounds in the other base metals, especially lead and tin, are looking more robust. For the metals, another wave of Covid-19 may well be more bullish than bearish, given the extent of the vaccinations in major metal consuming countries compared with the level of doses given in major producing countries.
Overall, while prices are generally holding up well relative to the strong gains seen over the past 15 months, there does seem to be a lack of willingness among buyers to chase prices above these levels and that could lead to long liquidation by investors, especially if equity markets take fright due to the spread of the Delta variant. A secondary reaction may then be more bullish if supply is further affected.
Gold prices have been consolidating after the sharp sell-off in mid-June. Given the pattern on the chart, gold prices still look vulnerable. The cheaper gold becomes, the more attractive it is as a haven asset, and if the Delta variant of the coronavirus does drive a fourth wave of the pandemic, then investor confidence may well take another hit. We also note a slight easing in the US treasury yields and an up-tick in the yen, which could both be an indication of some pick-up in haven demand. The moves are not significant yet, but are worth watching.