US stocks opened lower today following the President’s Day celebrations on Monday; Treasury yields jumped as markets ramped up their hawkish Fed bets. Tomorrow Federal Reserve minutes should help confirm the policymakers’ rhetoric. The 10yr yield gained ground to test 3.91%, and the 2yr yield is close to the November highs of 4.79%. The dollar was caught between gains and losses today but settled marginally unchanged around 104. From the data releases, US business activity steadied in February, with service sector performance back in the expansionary territory. Likewise, European business activity improved sharply in February, with both the service and manufacturing sectors improving m/m; the latter remained contractionary at 48.5. Previously-owned home sales in the US declined for the 12th straight month as mortgage rate increases continued to filter through the economy and deter potential buyers.
Some moderate upside prevailed today, with marginal gains seen taking place by the end of the day.
Aluminium broke above $2,460/t in the latter half of the day to settle at $2,467.50/t. Aluminium production in China remains under threat, given the continued impact of power rationing, especially in Northern regions. Around 800,00mt of aluminium capacity is set to be cut in Yunnan for around ten days, threatening 1.6mt of alumina demand and prices, accordingly, according to SMM. Copper gained a footing above $9,150/t and closed just under $9,200/t. Nickel gains were more robust, as the metal broke above $27,200/t but struggled above this level to close at $27,105/t. Lead and zinc both closed lower at $2,141.50/t and $3,135.50/t, respectively. Spreads continued to weaken across the board, with aluminium now below -$40/t, suggesting no fundamental demand change coming out of China. Domestic prices remain subdued.
Oil futures moved lower today as WTI and Brent softened into $76/bl and $83/bl. Data points to strong crude flow from Russia into China in recent days, reaching record levels, suggesting that demand in China is growing and the economy might first prioritise discounted fuels to fulfil the growing demand. Gold and silver remained unchanged at $1,834/oz and $21.84/oz, respectively.
All price data is from 21.02.2023 as of 17:30