US stocks continued to edge higher as lower-than-expected inflation reading added to market confidence. S&P 500 closed the first quarter 7.50% higher, despite a tighter monetary policy environment, financial instability, and, in turn, threats of recession. The core PCE reading rose by 0.3% y/y, slightly below the forecasted 0.4%; the overall level softened to 5.0% y/y. While this softness has been welcomed by the markets, the level is still far off the Fed’s target rate. Elsewhere, EU CPI print highlighted the peak inflation narrative as prices softened to 6.9% y/y; however, core print ticked higher to record highs of 5.7%, suggesting that subsequent price softness could be patchy as it is supported by sticky core inflation. The dollar edged higher, and the 10yr US Treasury yield remained unchanged above 3.50%.
Another day of lacklustre base metal performance after metals dipped lower in the latter half of the day following the PCE release. Aluminium shot up higher in the latter half of the day, finding momentum after breaching the $2,400/t level, settling at $2,413/t. Copper continued to struggle above $9,000/t, and the metal traded lower at $8,993/t. Lead and zinc closed at $2,107/t and $2,922.50/t, respectively. Chinese economic data pointed to a pickup of activity in the housing sector after home sales rose for the second straight month in March; while this is seen as a positive sign, we expect a recovery in the sector to be marginal, and high growth figures might be due to performance base seen last year. This optimism was further supported by better-than-expected service activity, with non-manufacturing edging higher to 58.2 in March, the highs not seen since May 2011.
Oil futures strengthened slightly, ending the week 7.0% higher. WTI and Brent now trade at $75/bl and $79/bl. Gold and silver closed Friday broadly unchanged but marked one of the best monthly performances since July 2022, as investors rushed to the safe havens amid banking woes. Gold and silver were at $1,979/oz and $24.10/oz, respectively, at the time of writing.
All price data is from 31.03.2023 as of 17:30