US stocks sold off as Credit Suisse's woes dampened the risk-on sentiment. We saw investors rush back to traditional safe havens for safety: the dollar rallied to 100 DMA level of 104.90, and the yen jumped higher. The Treasury yields plunged as investors scaled back their expectations of a Fed hike next week; the forward swaps are now forecasting a 10bps hike and a drop of 90bps from current levels by the end of the year. In the meantime, all eyes are set on the ECB meeting tomorrow, which is expected to increase interest rates by 28bps, down from 38bps expectations seen on Monday. From the data side, US PPI fell by 0.1% m/m in February, with both goods and services driving the decline. Yesterday’s CPI report pointed to a faster slowdown in commodity pricing pressures, with new and used vehicles feeling the brunt of the decline. Continued easing of the supply chain weighs on costs faced by manufacturers, and whilst this might bring a round of buying from consumers, we do not expect this gain in sales to be sustainable.
Base metals suffered from the ripple effect of the risk-off sentiment today; the complex closed lower, testing key support levels. Aluminium fell by more than $80/t on the day, breaching the support at $2,280/t while still remaining above the January lows of $2,250/t. Likewise, copper sold off to $8,504.50/t. Lead and zinc closed lower at $2,069/t and $2,866/t, respectively. Stocks all dropped lower today, apart from copper, as downstream consumption accelerated into a peak season and some withdrawals took place. We expect players to be more willing to purchase at lower levels, and activity should pick up slightly in the coming weeks. The cash to 3-month spreads remained broadly unchanged, and we expect some of the recent activity resumption to provide support for the levels.
Oil futures plummeted, with WTI and Brent now at $65/bl and $71/bl, January 2022 lows. On the contrary, precious metals benefitted; gold and silver jumped higher to $1,934/oz and $21.85/oz, respectively.
All price data is from 15.03.2023 as of 17:30