US stocks fluctuated ahead of Powell’s speech today, which should address the path of monetary policy in the coming months. Many will pay attention to any indications confirming a pivot shift by the end of the year, but we expect continued reiteration of a higher-for-longer terminal rate outlook. The recent jobs figure would help highlight the prevailing economic resilience. In the meantime, the Fed’s Bank of Minneapolis President Kashkari mentioned that policymakers would need to continue raising rates to around 5.4%. The dollar steadied after two consecutive days, settling at 103.60; 10yr US Treasury yield was at 3.63%. Elsewhere, Japan wage data surprised on the upside, gaining as much as 4.8% y/y in December, marking the fastest rate of growth since 1997. This release could fuel hawkish speculations from the new BOJ governor as Kuroda steps down in April.
Likewise, moderate fluctuations were seen across the base metals market today, with momentum struggling to point out an outlook in either direction. Aluminium wavered around the $2,350/t level, settling slightly lower at $2,524.50/t; cash to 3-month spread tested $40/t contango again. Some downstream aluminium players in China are seen returning to resume production. However, power curtailment remains in place for many provinces, with Yunnan expected to continue to see a fall in output in the coming weeks. Likewise, copper saw some moderate upside, gaining ground to $8,925/t. Nickel tested the $27,000/t level, but managed to settle slightly higher at $27,248/t. China’s quiet recovery out of lockdown meant demand did not materialise at the pace many expected, and local inventories continued to build. In particular, SHFE stocks rebounded, closing at 2,812mt. LME nickel inventory, on the other hand, declined, hitting a new low of 48,672mt last week, highlighting the discrepancy between the regions. Lead and zinc closed at $2,098/t and $3,136.50/t, respectively.
Oil futures jumped after Saudi Arabia announced higher crude prices for its Chinese customers, signalling higher confidence in the region’s demand outlook. WTI and Brent settled at $76/bl and $83/bl. Gold and silver edged higher to $1,876/oz and $22.30/oz, respectively.
All price data is from 07.02.2023 as of 17:30