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Copper on the back foot in Asian session

April 12, 2021by Nicholas Kabaso
  • Speaking on Friday, Zambian Health Minister Dr. Jonas Chanda said that Zambia would receive its first consignment of the coronavirus vaccine on Monday 12 April. According to Chanda, the vaccines are under the COVAX facility and the consignment will consist of an initial 228K doses of the Oxford AstraZenca vaccine. Chanda added that the administration of the vaccines would be done in accordance with the prioritization cri-teria as outlined in the national vaccine deployment plan to ensure that those at the greatest risk receive the vaccine first. The news is a wel-come development in Zambia’s efforts to combat the pandemic with the country having lagged some of its Southern African peers in launching a vaccine programme.
  • On the base metals front, Reuters reported this morning that Chinese Premier Li Keqiang stressed the need to strengthen market regulation of raw materials to ease the cost pressure of enterprises amid rising global commodities prices. This has led the base metals market to specu-late that the Chinese government may have price controls in mind as well as other measures to decrease the strong rise of commodity prices.
  • 3m LME copper fell by as much as 1.1% to $8829.50/tonne while zinc was down 1.4% at $2791/tonne.  The Shanghai benchmark for copper declined by some 1.7% to CNY65 760/tonne during the Asian session.
  • On the global front, a report from BoFA has pointed out that the equity markets have attracted more than half a trillion dollars in the past five months which exceed the combined inflows over the past 12 years. We see this as a direct consequence of the massive amount liquidity in-jected into the market by the global central banks looking to find a home. Valuations are at their highest level since the Dotcom bubble with the likes of the S&P trading at nearly 22 times its forward earnings. How much upside at current levels is debatable, but we are undoubtedly in bubble territory and there is a strong possibility that stocks temper in the coming months as the broader economic reality post the stimulus becomes clear. Any economic recovery will be patchy, tech stocks have been overinflated and need to correct. Interestingly, there has been a massive $40bn wager placed on the VIX that it will break above 25 and rise to 40 by mid-July. Tactical equity traders have been warned.
  • Meanwhile, the Fed remains committed to remaining ultra-accommodative in its monetary policy stance. In an interview with 60min, Powell described the economy as being at an inflection point where growth and employment were ramping higher, however, the economy remained in the throes of the pandemic and the threat of a third wave that could impose more lockdown restrictions on the US economy. With the vac-cination drive in full swing, Powell advised against the risk of opening up too soon and risking a fresh round of infections and deaths.
  • Fresh protests have erupted  against the police after an office fatally shot a young black man after stopping his vehicle for a traffic violation, not far from where George Floyd was killed. It is unclear the exact circumstances, but it has unearthed more protest action which could very well escalate given the George Floyd trial that is still under way and a number of other incidents that have taken place in the past year.
  • Risk mood in Asia has been sombre and this has supported the USD at the start of the week with the index holding above the 92.25 mark.  The EUR-USD traded at a high of 1.1911 before EUR-JPY cross selling pressured the single currency resulting in it marking time around the 1.8885 level into the EU open. Cable charts are pointing lower with support at 1.3630 eyed.  Japanese importers were noted buyers around the Tokyo fix following through towards the 109.00 level however Archegos related sales post the Hong Kong fix has kept things contained.  Emerging markets are on the back foot with the likes of the TRY shedding around 0.3% thus far. Pulling back the lens, investors remain committed to buying on any dips approaching 92.00 in terms of the USD Index with end March highs very much in the cross hairs. IMM data has shown that USD net shorts have fallen to the lowest level since June 2018
  • The USD-ZMW extended its journey north of the 22.000 mark closing at a fresh high on Friday. As business activity heightens following the Easter break and in the absence of an intervention by the central bank, the Kwacha is seen a coming under renewed pressure  in the week ahead. 
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Nicholas Kabaso

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