Commodities Daily - September 24, 2021

> Oil prices keep rising with fundamental support aided by global market risk-on. Brent has inched even higher to slightly above $77.7/bbl this morning amid strong market fundamentals (in particular, a further drop in oil inventories). Today, US new home sales data for August and the weekly Baker Hughes US active rig count will be in focus. In our view, Brent is most likely to break above its YTD high of $77.84/bbl today and may close out the week above $78/bbl. > Gold loses ground as US Treasury yields soar. Gold sank from $1,770/oz to $1,750/oz yesterday, despite supportive macro data, as the US 10y Treasury yield jumped from 1.31% to 1.43%. Gold is trading near $1,755/oz as we write. Today, the market awaits US new home sales data for August. We expect bullion to retest support at $1,750/oz today.> Metals mixed, aluminum and copper resting after recent roller coaster. Base metals traded mixed yesterday, with the aluminum and copper markets seeing a drop in volatility following the Fed decision. A pause in the negative news flow around the Chinese property sector was responsible for the generally moderate dynamics across metals.OIL PRICES KEEP RISING WITH FUNDAMENTAL SUPPORT AIDED BY GLOBAL MARKET RISK-ONYesterday, Brent rallied $1.75/bbl to as high as $77.35/bbl, with US equities advancing and the dollar weakening as investors embraced the view that a looming reduction in Fed stimulus shows confidence in the economic recovery from the pandemic. This, however, was slightly undermined by preliminary September PMI data. Eurozone manufacturing and services PMIs missed expectations, albeit staying in expansion territory. Although growth is still being observed, the issue of bottlenecks suppressing further progress remains. The composite eurozone preliminary September PMI fell to 56.1 (a five-month low), from 59.0 in August. The same data for US yielded similar results, showing the slowest pace of expansion in a year amid relentless supply constraints and peaking demand. Nevertheless, despite these somewhat downbeat prints, European stock markets and oil traded higher yesterday. Brent eventually finished at $77.25/bbl, its highest settlement price since October 2018, fixing $1.06/bbl above the previous settlement.This morning, Brent inched even higher to slightly above $77.7/bbl amid strong market fundamentals - in particular, an ongoing drop in oil inventories. Today, investors will eye US new home sales data for August and the weekly Baker Hughes US active rig count. Given the fundamental market strength, we think Brent is likely to break above its YTD high of $77.84/bbl today and could well end the week above $78/bbl. Boosting oil market sentiment has been the recent upbeat market outlook expressed by some of the world's largest oil traders. Vitol sees Brent rising above $80/bbl, partly as surging gas prices boost demand for crude in power generation. OPEC also expects global oil markets to tighten due to the shortfall in natural gas, as companies are forced to switch to liquids for power generation. It is also important to highlight that technical indicators - such as Brent having closed above its upper Bollinger band -show that the rally in oil may be due for a pullback. The last time Brent closed above the upper Bollinger band, it proceeded to decline about 2% over the following three LD LOSES GROUND AS US TREASURY YIELDS SOARGold dropped from $1,770/oz to $1,750/oz yesterday as the US 10y Treasury yield soared from 1.31% to 1.43%, reducing bullion's appeal as a non-yielding asset. This came despite EUR/USD firming from 1.169 to 1.174 and the release of mostly supportive macro data. The Chicago Fed national activity index for August came in at 0.29 points, significantly below the 0.50 consensus. The Kansas City Fed manufacturing activity index also declined to 23 points (below the consensus of 25 points). US initial jobless claims reached 351k last week, which was above the consensus forecast of 320k and dented sentiment around the economic recovery. The preliminary September Markit PMI for the US came in at 60.5, just under the 61 consensus, while the services PMI reached 54.4 versus 54.9 expected and below the August reading of 55.1, which had been affected by the spread of the Delta variant. All of this data was positive for bullion but failed to overcome the prevailing headwinds, as markets began to reprice the outcome to this week's Fed meeting and concerns eased over the potential collapse of Chinese real estate developer Evergrande. Meanwhile, the September Markit PMIs for the eurozone also came in lower than expected, at 58.7 (60.3 consensus) for the manufacturing sector and 56.3 (58.5 consensus) for the services sector. In addition, the US leading index reached 0.9% for August, versus the consensus of 0.7%.Gold is trading near $1,755/oz as we write. Today, the market awaits US new home sales data for August. Several Fed officials, including Fed Chair Jerome Powell, are also due to give speeches today, which could provide negative sentiment for gold later this evening. We expect bullion to retest support at $1,750/oz TALS MIXED, ALUMINUM AND COPPER RESTING AFTER RECENT ROLLER COASTERYesterday, base metals closed mixed. The 3m LME contract on copper was down 0.17% (-$15/tonne from the previous day's close) at $9,285/tonne and aluminum edged up 0.63% (+$19/tonne) to settle at $2,957/tonne, while nickel was up 1.46% (+$280/tonne) at $19,425/tonne and zinc added 1.93% (+$59/tonne) to $3,092/tonne.Copper and aluminum showed relatively moderate dynamics, with volatility low after the noise from the Fed decision faded and Chinese authorities calmed markets by injecting liquidity. And though the Evergrande story might be in the background for now, the fact is that construction accounts for about a third of copper demand in China, meaning that the property sector and its health will remain a key focus for investors in the near term and will to a large extent drive copper prices. For now, we expect copper to trade in the $9,300-9,600/tonne range that has been prevailing since mid-June, all else being