Commodities Daily - May 14, 2021

> Oil slides amid deteriorating coronavirus situation in Asia. Brent is hovering below $67/bbl as we write, with the market today eying US April retail sales and industrial production, the preliminary University of Michigan consumer sentiment index and weekly Baker Hughes rig count. From a technical perspective, yesterday's correction exposed Brent to a potential deeper correction to the $64.4-65.7/bbl range. However, we think the ongoing stock market rebound, a halt to dollar strengthening and likely upbeat US macro data will push it beyond $67.3/bbl resistance and possibly toward the $68.1-69.2/bbl range.> Gold rises as US Treasury yields ease. Gold edged up to $1,820/oz yesterday as the 10y US Treasury yield declined to 1.66%. The key data point yesterday was the US PPI reading for April, which came in at 0.6% m-o-m, down from 1.0% in March but above the consensus. During the Asian trading session today, gold was quoted close to $1,825/oz. Investors are looking ahead to US retail sales and industrial production data for April. We expect bullion to test support at $1,800/oz today. OIL SLIDES AMID DETERIORATING CORONAVIRUS SITUATION IN ASIABrent briefly traded near $69/bbl early yesterday before sliding to $67.5/bbl during early European trading. Oil headed lower as countries in Asia continued to fight outbreaks of Covid-19 that have highlighted the patchy global recovery from the pandemic, despite US demand picking up. Singapore is reimposing curbs, Japan is planning to extend curbs to more prefectures, China has seen its first infections in about a month, and key oil importer India continues to report more than 300,000 cases a day. In a sign of India's ongoing struggle with the latest outbreak, some local ports have declared force majeure due to staffing shortages. On a positive note, India's Oil Corporation (the country's largest oil refiner) is shopping for crude again, issuing three tenders after a one-month hiatus, providing some optimism on Indian demand. The significance of the company's move will depend on how much it purchases.Ahead of US trading hours, investors were digesting upbeat US weekly jobless claims data (initial claims dropped to a 14-month low last week) and upbeat April PPI data. Pent-up demand is clearly pushing against supply constraints, driving the PPI up by 0.6% in April (versus the 0.3% consensus forecast) after a 1.0% surge in March. Rising prices (the CPI data released earlier this week was even more upbeat) are now resulting in a broad retreat in commodities amid speculation that leading central banks may temper monetary support as inflation picks up. However, the Fed so far continues to signal it can tolerate higher inflation for some time to offset the years in which inflation was lodged below its 2% target, a flexible average. Brent eventually settled yesterday at $67.05/bbl, down $2.27/bbl on the day.Brent is hovering below $67/bbl as we write, with the market today eying US April retail sales and industrial production, the preliminary University of Michigan consumer sentiment index and weekly Baker Hughes rig count. The impact of massive fiscal stimulus in the US in the form of $1,400 checks sent out in March should have continued to support consumer activity in April. However, strained supply chains may have held back industrial output growth last month. From a technical perspective, yesterday's correction exposed Brent to a potential deeper correction to the $64.4-65.7/bbl range. However, we think the ongoing stock market rebound, a halt to dollar strengthening and likely upbeat US macro data will push it beyond $67.3/bbl resistance and possibly toward the $68.1-69.2/bbl LD RISES AS US TREASURY YIELDS EASEGold edged up to $1,820/oz yesterday as the 10y US Treasury yield declined to 1.66%, while EUR/USD recovered to around 1.208. The US PPI data for April was in focus yesterday. The m-o-m gauge came in at 0.6%, above the consensus estimate of 0.3% but below March's 1.0%. In y-o-y terms, the PPI was up 6.2% versus the consensus of 5.8% growth and the 4.2% reading for March. The PPI data supported gold yesterday, as many investors had been expecting higher readings in the wake of Wednesday's consumer price data. Meanwhile, initial jobless claims fell for the second week in a row, to 473k, which restrained gold's advance. Late yesterday, Fed Governor Christopher Waller mentioned in a speech that he expects inflation to exceed 2% for the next two years, a view in line with the latest outlook from the FOMC. He also indicated that readings near 4% month after month would start to concern him. Overall, the implications from his speech were positive for gold prices.During the Asian trading session today, gold was quoted close to $1,825/oz. Investors are looking ahead to US retail sales and industrial production data for April. Analysts expect to see an increase of around 1% m-o-m for both. Readings significantly above this level could create headwinds for gold prices. Overall, we expect bullion to test support at $1,800/oz today, while a rebound toward the $1,835/oz resistance level seems