US stocks opened higher on Monday, finding support at the moving average levels following the stronger-than-expected PCE reading on Friday. S&P 500 closed the third straight week lower, given the stronger economic data reaffirming the Fed's higher-for-longer rhetoric. This has meant the monetary policy cuts are now being priced out further down the curve. Durable goods orders contracted sharply, falling by 4.5% in January, highlighting the prevailing weakness in the manufacturing sector. Pending home sales, on the other hand, surged by 8.1% in the same month, the sharpest increase since the summer of 2020. We continue to see a dislocated economic performance across sectors, but key drivers behind market sentiment remain in the consumer segment, alongside labour data. The dollar settled at 105, and the 10yr US Treasury yield remained below 4.0%.
Base metals caught a bid today after testing support levels. China's PMI on Wednesday should help gauge where the economy is at, especially given that the hard data will not come through until mid-March. Key indicators will be the source of that growth, and more positive sentiment will be derived from improving new orders and business confidence conditions. With China's demand quiet, macro continues to play into market sentiment: 10yr yield is up, and DXY is creeping up. Still, the risk for this week could be higher given the increased volatility that we have seen in the last two years on March expiry, especially in nickel and copper. Aluminium found support at $2,330/t; the level futures struggled below on Friday, settling slightly higher at $2,363/t. Copper dipped below $8,700/t before gaining ground to $8,802/t. Lead and zinc closed higher at $2,111.50/t and $2,988.50/t, respectively.
Oil futures weakened today despite geopolitical risks coming from Russia earlier in the day, with WTI and Brent trading at $75/bl and $82/bl. Gold and silver diverged, with the latter softening slightly into $20.66/oz.
All price data is from 27.02.2023 as of 17:30