US stocks failed to hold up earlier gains, following the faster-than-expected inflation reading earlier in the day. S&P 500, however, struggled to break below the opening lows, and we anticipate this is due to the inflation figure being within the margin of error in relation to the estimated level. US CPI grew by 6.4% y/y in January, up from the estimates of 6.2% provided by Bloomberg. Energy and shelter costs were again the key drivers of growth, with the former remaining at elevated levels during the month. Core inflation rose by 5.6% y/y, and consumers shifted more of their expenditure towards the services. The forward swaps are now pricing in higher-for-longer terminal rates. The dollar jumped higher to 103.40, and the 10yr US Treasury yield strengthened into 3.78% for the first time since early January. Elsewhere, UK wages rose sharper than expected, increasing by 6.7% y/y in December, marking the fastest pace of growth since the series started in 2001.
Base metals jumped higher in the latter part of the day on the back of CPI data, but quickly reversed these gains to settle marginally unchanged. Aluminium settled lower at $2,409/t after breaching support of $2,408/t. Many aluminium smelters in Europe continue to face challenges in production despite the drop in regional energy prices, according to Norsk Hydro, with a further 60,000t of capacity to be potentially curtailed if there is another increase in energy prices. At the same time, stocks continued to build, and LME closing warrants were seen rising sharply, jumping to the April highs at 601,600mt. Copper jumped higher, but struggled to break above $9,000/t, settling at $8,946.50/t. Lead and zinc remained broadly unchanged at $2,095/t and $3,082.50/t, respectively.
Oil futures tumbled after the US stated its plan to release 26m more barrels from its reserves, with deliveries set to take place between April and June. WTI and Brent tumbled to $78/bl and $85/bl. Precious metals were all seen lower, with gold and silver breaking to $1,847/oz and $21.65/oz, respectively.
All price data is from 14.02.2023 as of 17:30