Metals prices ended mostly lower yesterday, with nickel and lead being the worst performers. There was not much new in terms of metals-specific news, with attention very much focused on external variables instead, such as the US/Chinese trade dispute that has been exacerbated recently by the arrest of Huawei’s CFO. Yesterday, a Canadian court adjourned without deciding the issue of setting bail and a second hearing will take place later today to decide the matter. Ms Meng is asking the court to free her on bail given the hypertension she is suffering, coupled with the fact that she has two properties in Vancouver which she could pledge as part of her bail. Although China remains irate over her detention and is protesting vigorously, we read today that Beijing has agreed to launch preliminary trade negotiations with the US. This is a significant development and is providing a lift for most markets as it is an encouraging signal that the Chinese authorities are prepared to separate the two issues, at least for now.

As a result of this, we are seeing a modest push higher in the metals group today, with copper and zinc being the best performers today. Aluminum is also up slightly despite the roughly 32,000 ton increase in its LME stock position. Also, a subsequent review of China’s weaker than expected import readings (out yesterday) reveals that the import figures do not adjust for the fact that the numbers are based on import value as opposed to volume and so import demand may be not as weak as initially implied given that commodity prices were sharply lower last month. Separately, and also helpful today pricewise, Reuters reports overnight that Chinese banks extended more new loans than expected in November after a sharp drop seen in the previous month, a possible sign that government pressure on banks to step up loans to smaller firms may be starting to bear fruit.

In other markets, we are not getting much of a break in the Chinese ferrous group, where steel futures dropped for a third consecutive session on Tuesday. Baoshan Iron & Steel said yesterday that it would cut prices of its key steel products for January delivery and Wuhan Iron and Steel also lowered its pricing. Coking coal and coke both declined as well, although iron ore prices ended with a modest gain.

In the precious metals group, gold seems to be on the move again after a disappointing finish yesterday. It is now up by $4.50/ounce at $1254/ounce, while silver has tacked on $.16, currently up $14.77. Platinum and palladium are each up by $5.70/ounce and $21/ounce, each trading at $788/ounce and $1180/ounce respectively.

The strength we are seeing in the precious complex is likely on account of a weaker dollar. Yesterday, the general dollar index was up, but this was mainly attributable to the two cent plunge in sterling following a postponement of the Brexit vote. Prime Minister May will be in both Berlin and Brussels today to discuss more European concessions that could enable her to re-table the measure, but Brussels has already said that it is not going to reopen the agreement and will likely send her back empty-handed. As a result, the situation facing the UK still remains very uncertain and as our chart illustrated yesterday, none of the options in front of the government look that appealing at this stage. One positive is that sterling has at least stabilized today, now trading at over $1.26.

France is grappling with its own problems, but we are not seeing any undue pressure on the Euro, which has been surprisingly steady over the past few days and is currently trading at just under 1.14. Yesterday, President Macron finally addressed the nation and offered a slew of concessions, but these will likely fall short of the more aggressive initiatives that protesters are demanding. The problem the French President is facing is that he has only a certain amount of budgetary largess to dole out given that the French deficit could easily reach or surpass the EU’s 3% limit if the concessions get too large, an issue that the Italians are grappling with as well as they try to get their spending under control.

Out of India, the rupee was under immense pressure yesterday after the Governor of the Reserve Bank of India resigned abruptly on Monday after repeatedly butting heads with the government over policy and the bank’s independence (although he cited personal reasons for his resignation). Indian rupee forward rates fell more than 1%, posting their biggest daily slump in more than five years on Monday, but the currency has stabilized considerably today, as has the Indian stock market on state election results showing that the governing BJP did not do as badly as initially expected.

In the oil markets, prices fell sharply yesterday, this coming one day after the OPEC accords and we thought that we could be seeing more weakness in today’s session. Instead, values are slightly higher right now with Brent up $.40 and back over the $60/barrel mark, but sentiment remains brittle given that there are legitimate concerns about slowing oil demand that could more than offset the supply cutbacks being put through. Meanwhile, Reuters reports that money managers have cut their bullish holdings in both Brent and WTI futures and options to their lowest level in three years so far in December.

Equity markets overseas are mostly higher today, we suspect on account of the fact that the US/Chinese trade talks seem to be back on track. US markets are expected to open up strong, with the Dow looking at a 240 point initial gain, while NASDAQ and the S&P 500 are expected up by 76 points and 24 points respectively.

In macro news, we will be getting PPI numbers out later today, with not much change expected on either the overall or core rate. However, the chart in our report (go to our link) shows that inflation has been creeping steadily higher over the past few years and shows that the Fed’s rate increases are barely keeping up, which makes its recent reassessment to moderate its rate increases all the more controversial.