Resilience of Base metals as Spartans
Base metals are like spartans in the current environment, standing tall and resilient in front of Persians in the form of:
- 130 basis point rise in US 10 year bond yields in last one year to 1.77%.
- Dollar Index at 93.4
- Higher Covid cases with third wave in Europe and second in India and Brazil. This leads to uncertainty in economic recovery and thus lower demand for infrastructure and industrial related metals.
With Dow Jones, Nasdaq, Nifty, Sensex, DAX, FTSE, Hang Seng, etc taking hit in last 3-4 weeks because of the above-mentioned reasons, base metals are standing tall. With the exception of Nickel which has seen a decline of more than 10% from higher levels, other metals like Copper, Aluminum, etc. have not taken a double digit correction.
Looking at their strength and other macros, it looks like that they are consolidating and gearing up for the next move.
Our bias will be towards Copper here
and Steel in Ferrous metals.