Commodities Daily - August 9, 2021

> Oil slides as dollar strengthens, Covid spread weighs on demand. This morning, Brent slid to as low as $69/bbl, as the fast spread of the Delta variant has caused more restrictions to be renewed globally. While today's macro agenda is rather sparse, this week will see plenty of big releases, including the latest monthly oil market reports from the EIA, IEA and OPEC, as well as CPI data from a range of major economies. In our view, after this morning's setback, Brent is likely to rebound back above its 100-day moving average of $69.9/bbl later today, as the recent selloff seems overdone given the very healthy market fundamentals.> Gold retreats in wake of upbeat US nonfarm payrolls. Gold fell by $35/oz to $1,765/oz on Friday, while the 10y US Treasury yield climbed from 1.22% to 1.30%. US employment statistics came in better than expected. Bullion has weakened further this morning and is trading near $1,745/oz as we write. Today, markets await US JOLTS job openings for June. We expect gold to remain in a $1,735-1,755/oz range.OIL SLIDES AS DOLLAR STRENGTHENS, COVID SPREAD WEIGHS ON DEMANDOn Friday, Brent rallied $1.3/bbl to $72.4/bbl but then fell to as low as $70.3/bbl as the spread of the Delta variant in China and across the globe continued to cast doubt on demand growth. This morning, Malaysia eased restrictions for those who are fully vaccinated, even with new infections near a record, as the country charts a new path toward living with the virus. New cases in Thailand also stayed close to all-time highs, while US cases reached a six-month high and more parts of Australia were thrust into lockdown as Covid-19 spread beyond major cities. Meanwhile, China's former health chief said the country would impose strict border controls to curb the spread and that the idea of living with the virus is unacceptable. We also note that the authorities in Wuhan found nine cases after testing 11.3 mln people in the region, the original epicenter of the pandemic. Major oil price headwinds on Friday came from the reaction in global markets to the robust US jobs report, which fueled bets that the Fed may start easing its stimulus sooner than had been expected. The US labor market added 943k jobs in July, the most in nearly a year, while the estimates for job growth in the prior two months were revised higher and the unemployment rate dropped to a post-pandemic low of 5.4%, with earnings and hours worked remaining elevated. All in all, the jobs report helped inspire optimism over the prospects for the US economy, even as coronavirus concerns resurface. We note, however, that nonfarm payrolls remained 5.7 mln short of the pre-pandemic level, and that the recent pickup in Covid-19 cases stemming from the spread of the Delta variant poses a risk to the pace of job growth. Nonetheless, the jobs added in July brought the labor market another step closer toward the Fed's goal of "substantial" further progress, which should cause the debate over how quickly policymakers should begin dialing back their bond buying to intensify. Because of this, the dollar and the yield on 10y US Treasuries both advanced after the report came out.This morning, Brent slid to as low as $69/bbl, as the fast spread of the Delta variant has caused more restrictions to be renewed globally. While today's macro agenda is rather sparse, this week will see plenty of big releases, including the latest monthly oil market reports from the EIA, IEA and OPEC, as well as CPI data from a range of major economies. It is likely that US consumer prices rose at the slowest pace in five months in July, though we note that the pace of price growth has exceeded expectations for four months straight. The upswing in inflation has been mainly attributable to the categories most affected by the reopening of the economy, allowing Fed policymakers to stick to their rhetoric that the uptick in inflation so far seems to be temporary. The July reading of the producer price index is also due out of the US this week. In our view, after this morning's setback, Brent is likely to rebound back above its 100-day moving average of $69.9/bbl later today, as the recent selloff seems overdone given the very healthy market fundamentals. As for the rest of the week, we think Brent will continue to face headwinds and struggle to move much higher than $70/bbl amid the persisting concerns over the impact of the resurgence of Covid-19 on the short-term demand outlook, as well as the increased likelihood that the Fed will start tightening its policy sooner rather than later amid still-high inflation and the decent progress being made in the US job market. LD RETREATS IN WAKE OF UPBEAT US NONFARM PAYROLLS Gold dropped from $1,800/oz to 1,765/oz on Friday, while the 10y US Treasury yield jumped from 1.22% to 1.30%, creating a headwind for bullion. Further pressure came from EUR/USD, which slid from 1.183 to 1.176. The market was focused on the US labor market report. Nonfarm payrolls for July showed the biggest increase in nearly a year, with 943k new payrolls added, above the consensus forecast of 858k. Moreover, the US Bureau of Labor Statistics revised the number for June up to 938k from 850k. US unemployment slid from 5.9% to 5.4% in July, below the 5.7% expected. All of this indicated that the labor market is recovering at a healthy pace but is causing concern for investors that the Fed may start to reduce stimulus measures sooner than expected. Dallas Fed President Robert Kaplan said that the Fed should withdraw QE sooner rather than later. The pressure on gold was overwhelming and it eventually lost 2.4% on the day. An additional negative signal for gold came from the technical picture, which exhibited a so-called "death cross," with the 50d MA crossing below the 200d MA.Gold has slipped further this morning. Investors and traders in Asia have also started pricing in the US labor market data, pushing gold down to $1,690/oz at one point. However, it has recovered somewhat and is trading near $1,745/oz as we write. Today, the market awaits the June US JOLTS job openings report. Later this week we will see US CPI and PPI statistics for July on Wednesday and Thursday, respectively. Other US data due this week includes the NFIB small business optimism index for July, the University of Michigan sentiment index for August and weekly initial jobless claims. In the eurozone, we will see the ZEW survey for August and industrial production for June. We expect gold to remain in a $1,735-1,755/oz corridor