Daily metals

What's Moving Markets?Global equities ended higher, rebounding from a weak session on Tuesday as concerns over lofty AI valuations eased and corporate earnings remained in focus. Economic data also lent support, with the ADP report signalling stabilization in the labour market after two months of job losses, while the ISM services PMI climbed to an eight-month high. The US government shutdown is now the longest on record. Congress remains deadlocked, with about 600,000 federal employees working without pay and 650,000 more furloughed. Every week that passes with Congress deadlocked costs the US economy an estimated $10-$30bn. A risk-off tone across markets weighed on sentiment across the commodities complex. A stronger USD also weighed on investor appetite. Yields on 10-year US Treasuries rose by 7bp to 4.13%, while the USD index was steady at 100.2.Precious metals remained supported by broad risk-off sentiment that kept demand for safe-haven assets firm. Jobs data reinforcing the view that the Fed is unlikely to rush into further rate cuts, with inflation still above target and the government shutdown delaying key labour data. Several Fed officials have echoed Chair Powell’s recent hawkish tone, suggesting last month’s rate cut may be the final one of the year. Gold rebounded in Asia after once again finding support near $3,930, following its biggest one-day drop in a week as the USD climbed to a multi-month high and traders reassessed the Fed’s rate outlook. Chicago Fed President, Austan Goolsbee, said he’s more concerned about inflation than the job market. Traders see a roughly two-thirds chance of the Fed easing next month, a more hawkish view than two weeks ago.Base metals ended with gains, once again fuelled by momentum and optimism, now facing reality checks from a stronger USD, weakening demand, and shifting sentiment. Have we already seen the peak? Copper supply concerns were tempered after Codelco said its output this year and next will exceed 2024 levels. This is despite recent issues, such as the Jul accident at its El Teniente mine. Copper’s net long position of non-commercial traders has risen from 22,600 contracts in mid-Aug to 61,100 contracts at the end of Oct. However, it remains below peaks seen over the past two years. Trafigura delivered large quantities of aluminium (~100kt) to LME approved warehouses in Malaysia last week to benefit from a financial deal. For owners of metal to put it on LME warrant instead of offering it to the market, incentives would have to be higher than the physical premium to reflect supply, demand and costs including for freight and taxes. Indonesia’s aluminium expansion, driven by Chinese investment, could push the global market into a surplus next year, potentially weighing on prices. The pace of Indonesian supply growth is going to play a key role in shaping aluminium market balances and prices.Iron ore prices were steady following news of fresh production cuts at Chinese mills. The Hebei province reintroduced an environmental production cut alert.