1. Metals Outlook
  2. Daily Base Metals Report

US nonfarm payrolls came in higher once again, at 311,000, marking the 11th consecutive month of market underestimating the labour market tightness. As we have mentioned in our yesterday’s note, a reading above 300,000 for nonfarm payrolls suggests that the labour market is still running hot. Some respite came from wage growth data, which pointed to the slowest increase in a year. Still, the news was not enough to overshadow the flight to safety following worries about financial turmoil in the industry. As a result, we saw markets scale back their expectations for the pace of tightening, with forward swaps now pricing in a 36bps increase in the Fed’s March meeting. A similar downgrade was seen in European markets, as forward swaps point to a 45bps increase during the next meeting. The dollar sold off to 104.25, and the 10yr US Treasury yield sold off to 3.75%, marking a loss of 35bps over the course of two days. The 2yr yield also weakened rapidly, falling to 4.69%.

Metals gained some momentum in the latter part of the day following the nonfarm payrolls, but this was not enough to offset the risk-off sentiment, and metals closed lower on the day. Base metals’ prices continued on a downward trajectory this week, closing the week on the back foot. At the same time, copper and aluminium are seen hovering around the end-of-February lows. With that in mind, we have seen some downstream players resume purchases with lower prices, and some restocking took place as a result. In particular, aluminium breached the support level of $2,320/t to close at $2,313/t, the December lows. Copper tested the lows o $8,750/t but bounced back to $8,867/t, which once again reaffirms market resilience above $8,800/t; the cash to 3-month spread weakened back to -$25.00/t. Lead and zinc closed lower at $2,077/t and $2,937/t, respectively.

Oil futures benefitted from a softer dollar, with WTI and Brent jumping back to $77/bl and $83/bl. Precious metals rallied, and gold and silver, which have safe-haven properties, jumped to $1,587/oz and $20.50/oz, respectively.

All price data is from 10.03.2023 as of 17:30


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