US stocks dropped today following the release of the Fed’s minutes. During the latest central bank meeting, the policymakers reaffirmed their efforts to quell inflationary pressures, stressing that rates will remain higher for longer. At the time of writing, the markets are pricing in the rates to begin softening in H2 2023. Meanwhile, the US economy continues to show signs of cooling in the face of a tighter monetary policy environment, with supply-chain conditions continuing to ease and input prices declining amid slower demand. The US labour market data, on the other hand, highlights the employment resilience, with private payrolls exceeding expectations at 235,000 in December while jobless claims fell to a 3-month low. The dollar and the 10yr US Treasury yields jumped higher.
Sentiment across China was boosted by the news of further reopening with Hong Kong, lifting the shares to July highs. This momentum, however, failed to last across the base metals market, with performance across the group mixed today. Nickel, in particular, sold off for the second consecutive day, falling by more than $270/t during the day to $27,748/t on the back of index rebalancing taking place this month. Lead gains also did not hold as the metal fell to close at $2,217.50/t. Likewise, aluminium fluctuated, reaching a high of $2,320/t before settling at the previous close of $2,255/t. Zinc closed at $3,005/t.
Oil futures managed to settle higher despite fluctuating earlier in the day after Saudi Arabia cut prices, signalling slowing demand. WTI and Brent closed at $74/bl and $79/bl. Meanwhile, natural gas prices fell to the lowest level since October 2021 after the January weather was forecasted to be the warmest in years, easing the energy crunch for Europe’s outlook. Precious metals declined rapidly following the minutes from the Fed, driving the yields higher, with gold falling from a 6-month high of $1,865/oz to $1,830/oz.
All price data is from 05.01.2023 as of 17:30