US stocks weakened as investors assessed the recent data to gauge the monetary policy outlook. Markets continue to digest the possibility of a soft landing, especially after Friday’s surprising jobs report. Still, we are mindful that while the US economy remains resilient to the impacts of the Fed’s tightening, the longer-term path is that of deceleration, and we will continue to see marginal softness filter through the economy in the coming months, and the mood to sour closer to H2 2023. UK GDP declined by 0.5% in December, but for 2022, the nation avoided a recession by the narrowest margin. The economy was nonetheless 0.8% smaller than its size at the end of 2019, highlighting the economy’s fragility going into 2023. The dollar edged higher, and the 10yr US Treasury yield strengthened into 3.72%. The yen jumped higher on the open following a surprise nomination of Kazuo Ueda for the head of BOJ position, as he is seen to be more hawkish.
Sentiment continued to sour across the base metals market today, driven in large by the macro. China’s consumer inflation accelerated, rising by 2.1% y/y in December, with core inflation increasing by 1.0%, the sharpest increase since June, supported largely by the consumer sector. Producer deflation deepened in January, with prices falling by 0.8% y/y. This data further highlights the shift from producer to consumer demand in recent months, and we expect consumers to benefit the most from China’s reopening story and government support through the extension of new loans to businesses and consumers. Aluminium weakened, breaking below the support level of $2,460/t to settle at $2,440.50/t. Copper also continued to weaken, settling lower at $8,857.50/t. Lead and zinc closed lower at $2,078.50/t and $3,042.50/t, respectively.
Oil futures jumped higher after Russia said it would cut output by 500,000 bl/d, marking 5% of January output, on a threat of retaliation to Western sanctions. WTI and Brent now trade at $79/bl and $86/bl. Gold and silver remained unchanged at $1,858/oz and $22/oz, respectively.
All price data is from 10.02.2023 as of 17:30
