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Daily Base Metals Report

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Authors
Daria Efanova

Daria Efanova Head of Research

Contact research Contact Industrial Commodities


US stocks came in lower today after Jerome Powell stated that policymakers are likely to lift interest rates higher and potentially faster than originally expected as high inflation persists. The dollar jumped above 105, and 2yr yield tested the high of 4.96%, driven by unexpectedly aggressive rhetoric from the Fed. On the other hand, the 10yr US Treasury yield remained broadly unchanged, highlighting that most of the readjustment took place at the front end of the curve. EU bond yields weakened, with Germany 10yr at 1.69%, as softer inflation expectations data pointed to a 3yr-ahead figure falling to 2.5% and 1yr-ahead to 4.9%. This, accompanied by market pricing in most of the hawkish moves from central banks, should provide some respite ahead of the monetary policy meetings; we expect sentiment to improve slightly in the coming days. At the same time, EU governments will seek to rein in fiscal spending by member states that supported growth through the pandemic as well as the most recent energy crisis, as it aims to avoid severe budgetary restrictions that could push it into recession.

Metals weakened today, once again driven by a combination of a hawkish central bank outlook and weak demand out of China. In particular, Chinese exports continued to decline, falling by 6.8% in January and February, highlighting muted overseas demand. Domestic inventories continue to build higher, but markets remain hopeful for further signs of China's recovery, especially in April, one of the busiest periods of production. Aluminium weakened below yesterday's support level of $2,360/t to settle at $2,350/t. Aluminium smelters in Yunnan are said to have completed necessary production cuts, and we will start to pay close attention to production in the region in the coming weeks. Copper fell below $8,800/t to close at $8,763.50/t; downward momentum was further supported by the news that Peruvian production is set to normalise in the coming days, following months of unrest. Lead and zinc closed lower at $2,087.50/t and $2,954/t, respectively.

Oil futures weakened given the risk-off sentiment; WTI and Brent fell to $78/bl and $84/bl. Precious metals felt the sharpest declines, given their sensitivity to Fed moves, with gold and silver declining to $1,818/oz and $20.21/oz, respectively.

All price data is from 07.03.2023 as of 17:30

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