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