The equity markets in Europe came under pressure, but US stocks gained ground as investors weighed up the CPI reading tomorrow and the Fed decision on Wednesday. This week, there is a large amount of volatility risk due to central bank rate decisions from the Fed, ECB, BOE, Norges Bank, and Swiss National Bank. The VIX is rising back to 24; the Put/Call ratio for the S&P 500 was at 1.42 on Friday. The dollar is against the Yen and CHF, but the index consolidated today, and the 10yr yields for the majors are rising. The US 10yr yields at 3.586%, with the UK 10yr at 3.198%. The UK GDP came in above expectations, which could prompt a 75bp rate hike this week, but the implied probability favours 50bps; there is a risk premium for the UK at the moment. The ECB and Fed are also expected to raise rates by 50bps.
Metals prices were mixed today as aluminium and copper came under the most selling pressure. Aluminium on warrant stocks increased today by 17%; this, in conjunction with rising COVID cases in China, prompted fears over demand. Futures prices declined, testing support at $2,400/t and trading marginally above this level at the time of writing at $2,410/t. The cash to 3-month spread trades at -$35/t; the US will keep the section 232 duties in place after the WTO rejected the notion their tariffs were justified. Copper also failed to hold onto the highs of the day at $8,474/t, which prompted a sell-off back to $8,380/t, global demand is still prompting copper to fall, and the weaker spreads suggest the physical market is less tight. Zinc continues to have a purple patch as the near-term tightness in the spreads keeps prices bid, prompting a close at $3,269/t and the backwardation at $30.50/t. Conversely, nickel disconnects from the physical market; the cash to 3-month spread trades at $249/t contango, while the 3-month LME trades at $29,370/t after testing $30,000/t. Tin and lead were sold today, closing at $23,950/t and $2,180.50/t.
Energy prices gained ground today, with Brent and WTI at $77.68/bl and $72.97/bl, respectively. The spread between the 1st month at Cushing and brent is 4.67/bl, tightening from the November low at -$8.25/bl as WTI catches a bid as Russian crude is shipped to Asia. According to Bloomberg, nearly 90% of seaborne crude was shipped to Asia from Russia in the week ending December 9th. Gold and Silver softened today to $1,783.5/oz and $23.25/oz, respectively.
All price data is from 12.12.2022 as of 17:30
