European equity markets started the year on the front foot, with the FTSE bid to 7562 and Euro Stoxx 50 at 3890; the U.S. was marginally lower at the time of writing. The session in the U.S. has been choppy, with leading tech companies such as Apple declining. Markets are still quiet as traders’ investors return to their desks, and sentiment is mixed as risks to the global economy are significant, but we expect inflation to be softer in Q1. With China re-opening, strong demand for resources could trigger sharp gains in commodity prices, prompting inflationary pressures. U.S. yields declined, and the 10yr trades at 3.79%; the U.K. and Germany stand at 3.636% and 2.373%, respectively. The U.S. manufacturing PMI was in line with expectations at 46.2 and is contractionary, and the U.K. was slightly weaker at 45.3. The dollar index rallied today, with the greenback making large gains against CAD, CHF, and EUR.
Metals were mixed today, as copper and aluminium struggled. Aluminium prices tested support at $2,305/t, and this triggered the market to edge higher back to $3,018/t. The cash to 3-month spread is at $30/t contango, as ingot inventories in China accumulated for three consecutive weeks, gaining 14% to New Year's Day. On a historical basis, they remain very low. Copper failed to gain a footing above $8,500/t, trades at $8,330/t at the time of writing, cash to 3s at $13/t, contango. The weak data from the U.S. and softer economic growth expectations inhibited price action. Nickel prices gained ground, testing resistance at $32,000/t, but this level held firm. Tin was also bid, closing at $25,473/t, with zinc and lead at $3,002/t and $2,280/t, respectively.
Energy prices struggled today, with WTI and brent being sold to $77.67/bl and $82.70/bl, respectively. Gas prices declined sharply as the warm weather reduced demand across Europe. Gold and silver continue to benefit from the end-of-cycle momentum, but they both struggled to hold onto their highs, trading at $1,835/oz and $24.06/oz.
All price data is from 03.01.2023 as of 17:30