US stocks jumped higher today amid broader positive sentiment on speculations that the Fed will slow down the pace of hikes as inflation cools. Swap contracts now point to the terminal rate peaking below 5.0%, down from 5.06% last Friday. US CPI reading is out Thursday and is forecast to come down to 6.5% y/y, the level not seen since October 2021; core components of inflation are set to remain upwardly sticky. This comes in line with the inflation expectation data from the NY Fed’s survey that pointed to 1-year-ahead inflation declining to 5.0% in December. The dollar weakened to 102.96, the June low, and the 10yr US Treasury yield now trades at 3.50%.
Metals rallied on hopes of renewed Chinese demand. At the same time, officials are considering a record quota for local government bonds and widening the budget deficit target with the aim of providing support amid reopening. This, coupled with the historically low inventory level, boosted the risk appetite for the base metal group today. The only exception was nickel, which fell back below the $28,000/t support to close at $27,434/t. Aluminium saw the strongest gains, rallying by more than 5.5% to settle at $2,438.5/t, the highs not seen since the year-end. Next in line was zinc, which also saw a strong rally to close at $2,251.50/t. Likewise, copper jumped higher to $8,859.50/t; cash to 3-month weakened into -$26.00/t. Lead closed at $3,205.50/t.
Likewise, oil futures jumped higher on Chinese optimism; however, the move was limited as the demand outlook remained broadly unchanged given the build-up of inventory over the lockdown period. WTI and Brent now trade at $74/bl and $79/bl. Gold and silver wavered but settled at the previous day’s close of $1,875/oz and $23.0/oz, respectively.
All price data is from 09.01.2023 as of 17:30