Commodities move sideways in European session. WTI crude oil hovers around 81 while gold remains above 1200. As we have a light economic calendar, price movements may remain narrow for the rest of the day. Stocks in Asia climbed modestly despite weak US economic as strong corporate earnings results boosted optimism. The MSCI Asia Pacific Index gained +0.70% with raw material and banking sectors the best performer. Japanese stock got hit as strength in Japanese yen dampened earning prospects on exporters.

European bourses also open higher with benchmark indices rising more than +1%. Eurozone's Sentix Investor Confidence Index unexpectedly rose to 8.5 in August from -1.3 a month ago. The market had anticipated a mild improvement of 2. Meanwhile, Germany's trade surplus widened to 12.3B euro in June from 10.6B. Strong economic data in the Eurozone has driven the euro to a 3-month high against the dollar.

Base metal prices have been strong with the LME metal index gaining about +13% the past 3 weeks. Investors appeared to have digested slowdown in Chinese economy and have recently focused on future QE-stimulated growth. However, we begin to worry that base metals may be approaching their peaks.

As shown in the following chart, OECD leading in turn suggests decline in base metal prices. Another indicator is US ISM Manufacturing Index which has dropped for 3 consecutive months. The chart below also highlights the close linkage between ISM data and base metal prices. We caution that the base metal complex may stage a meaningful correction in coming months.