Commodities Daily - October 1, 2021

> Oil prices highly volatile ahead of DM manufacturing PMIs. This morning, Brent is trading near $78/bbl. The rally in oil prices that began yesterday has paused, after Reuters reported that OPEC+ was considering boosting production by even more than had been previously indicated at its meeting next week. Today, investors will eye September manufacturing PMIs from DMs, September CPI data for the eurozone, US personal income and spending data for August, and the weekly Baker Hughes update on active US oil rigs. In our view, this raft of data could make for elevated volatility, though we think Brent will ultimately end the week close to the current $78/bbl.> Gold rallies amid decline in US Treasury yields. Gold rocketed from $1,730/oz to just below 1,760/oz yesterday, while the US 10y Treasury yield slid from 1.52% to 1.49%. Gold is trading near $1,755/oz as we write. Today, the market awaits Markit manufacturing PMIs for DMs, the US ISM manufacturing PMI for September, US PCE inflation for August, and the eurozone CPI for September. We expect bullion to test support at $1,750/oz today.> Metals plunge on weak Chinese manufacturing PMI and hawkish Fed. With technical levels broken through across several base metals, negative sentiment is predominating in the markets today. Though fundamentals are in its favor, copper is also losing steam amid the slowing Chinese economy.OIL PRICES HIGHLY VOLATILE AHEAD OF DM MANUFACTURING PMISThe new front-month December Brent contract slid toward $76.5/bbl early yesterday, but later in the day rebounded to as high as $79.3/bbl after it was reported that China had ordered its top state-owned energy companies to secure supplies at all costs. The reports came not long after the country's September manufacturing PMI data pointed to a contraction in factory activity for the first time since the pandemic began amid the recent power outages. Bloomberg reports that the order was directly from Vice Premier Han Zheng, who supervises the nation's energy sector and industrial production, and that it was delivered during an emergency meeting earlier this week with officials from Beijing's state-owned asset regulator and economic planning agency. This clearly highlights that blackouts will not be tolerated in China. In another sign of how worried Chinese officials are, Premier Li Keqiang vowed that every effort would be made to keep economic growth on track. Front-month Brent eventually settled at $78.52/bbl yesterday.This morning, Brent is trading near $78/bbl. The rally in oil prices has paused, after Reuters reported that OPEC+ was considering boosting production by even more than had been previously indicated (it had been raising production by 0.4 mln bpd per month) at its meeting next week. Meanwhile, White House Press Secretary Jennifer Psaki noted that the rising price of oil "is of concern for the US" and that the administration had been in touch with OPEC about oil prices. Today, investors will eye September manufacturing PMIs from DMs, September CPI data for the eurozone, US personal income and spending data for August, and the weekly Baker Hughes update on active US oil rigs. In our view, this raft of data could make for elevated volatility, though we think Brent will ultimately end the week close to the current $78/ LD RALLIES AMID DECLINE IN US TREASURY YIELDSGold jumped from $1,730/oz to just below 1,760/oz yesterday, while the US 10y Treasury yield slid from 1.52% to 1.49%. However, EUR/USD corrected from 1.160 to 1.158, creating a headwind for bullion. Yesterday's data releases were mixed for gold. US weekly initial jobless claims rose to 362k last week, above the 330k consensus. The Chicago PMI for September came in at a modest 64.7 points versus the 65 consensus. That helped gold yesterday, as it called into question the pace of the recovery in the US. However, the third reading of US GDP for 2Q21 showed a surprising increase to 6.7% annualized from 6.6% in the previous reading. This should have done nothing for gold, but nevertheless it soared above $1,760/oz in a short space of time on no discernible fundamental factors (perhaps quarter-end flows played a role). The CFTC commitments of traders published last week showed that speculators had boosted their gold shorts to almost the highest levels since 2019. It is likely that that took profits yesterday as gold touched month lows. Hawkish comments from Fed officials limited bullion's rally. Atlanta Fed President Raphael Bostic said he expects three hikes in 2023, while Chicago Fed President Charles Evans said he expects tapering to start this year and end in mid-2022 or next fall.Gold is trading near $1,755/oz as we write. Today, the market awaits Markit manufacturing PMIs for DMs, the US ISM manufacturing PMI for September, US PCE inflation for August, and the eurozone CPI for September. We expect bullion to test support at $1,750/oz TALS PLUNGE ON WEAK CHINESE MANUFACTURING PMI AND HAWKISH FEDYesterday, base metals closed in the red. The 3m LME contract on copper was down 2.27% (-$208/tonne from the previous day's close) to settle at $8,951/tonne, aluminum edged down 1.57% (-$45/tonne) to $2,858/tonne, nickel lost 1.66% (-$302/tonne) to $17,973/tonne and zinc dropped 1.01% (-$33/tonne) to settle at $3,015/tonne.The LME contracts fell yesterday almost across the board, tracking their Shanghai counterparts after Chinese PMI data showed that manufacturing contracted in September for the first time since the pandemic began last year. Additional pressure came from a rising dollar on more Fed talk of policy tightening. Against this backdrop, copper, nickel and lead broke through their recent support at the 200-day moving averages. For copper, the fact that Shanghai copper inventories were reported at a recent low (at 43.5 mln tonnes in the week to October 1), combined with the news of a 4.6% drop in Chilean copper output in August, failed to arrest the fall yesterday.Today, base metals in London have extended their losses, while the Shanghai exchange is closed for a week-long holiday, which starts today. Still, copper is holding out near support at $8,900/tonne due to investors' strong belief that it will act as a key material in the global energy transition to come. While the fundamentals are still in favor of bulls, we believe copper is more likely to keep trading sideways or eventually break through the long-standing support at circa $8,800/tonne later in 4Q21, pressured by a slowing Chinese