US stocks started the day on the front foot, as markets weigh on a much-anticipated CPI release tomorrow, with economists making last-minute adjustments to their final figure. Overall prices are set to grow by 6.2% y/y, with core at 5.5% y/y, pointing to a slowing pace of inflation cooling. A CPI move outside market expectations could create ripple effects through the markets. The greater risk is on the upside if the figure comes up above market expectations, which could cause a similar market reaction, as we have seen from the jobs report. Inflation is set to remain stubborn, especially as it edges closer to core performance, which is upwardly sticky. With that in mind, swap rates are pricing in a peak of 5.20%, with some reaching as high as 6.0%, above policymakers' forecast. Likewise, European stocks posted moderate gains ahead of the data release. The dollar struggled to hold up earlier gains, and the 10yr US Treasury yield settled at 3.72%. Moreover, the European Commission stated that the euro zone area might fare better than expected, possibly avoiding a recession, given a mild winter and high level of energy storage.
Mixed sentiment across the base metals group today, with all eyes on US CPI figures. Still, following the end of the Chinese New Year holidays, there is a lack of consumption out of the region. Stimulus is not being realised, but the sentiment is also low, with consumer propensity to spend low. Metals are in contango, and with premiums low, underlying consumption is not yet there. Iron ore weakened sharply on Monday, falling to test the support of $120/mt. Aluminium was also under pressure today, breaching support of $2,440/t, settling at $2,412.50/t. Likewise, nickel remained subdued at $26,627/t. Copper gained ground, settling at $8,938/t. Lead and zinc closed at $2,097/t and $3,097.50/t, respectively.
Oil futures declined following the spike driven by Russia news, as markets reassessed the global demand picture. WTI and Brent now trade at $79/bl and $86/bl. Gold and silver fluctuated at $1,852/oz and $21.85/oz, respectively.
All price data is from 13.02.2023 as of 17:30