US stocks opened on the front foot following the surprise cut by OPEC+ of 1m bl/d, taking the spotlight away from other assets. The market response, however, did not persist, and softer economic data brought the momentum back to Friday’s close. The ISM’s gauge of manufacturing activity eased further down to 46.3 in March, with measures of new orders and employment retreating. We expect that the PMIs across key nations should point to a further divergence between manufacturing and service sector performance, with the latter remaining resilient. Still, markets continue to push back against central banks’ warnings over persistent inflation, focussing on a potential pivot and subsequent easing following the latest banking turmoil. The dollar softened to test the 102.20 once again, and the 10yr US Treasury yield weakened to 3.41%.
The oil move acted more bearish than bullish on base metals today, and even energy-intensive materials like aluminium and zinc struggled to gain momentum. Softer-than-expected China’s manufacturing performance helped bring prices back to key support levels. Right now, markets are calm, edging into lower volatility, as investors await the next shock. Aluminium found resistance at $2,430/t once again before calming slightly to $2,397.50/t. From a domestic production standpoint, we continue to see recovery in smelting production in China, but previously-curtailed Yunnan capacity is yet to be brought back online; still, social inventory continued to decline as consumption out of warehouses accelerated. Copper fluctuated around $8,950/t, closed slightly below this level at $8,917/t. Lead and zinc closed slightly lower at $2,115.50/t and $2,898.50/t, respectively.
Oil futures’ unprecedented move on the upside cooled slightly during the day, but both WTI and Brent futures remained elevated at $80/bl and $84/bl. We do not believe that this move will solidify the path of higher inflation for the Fed, and China remains key driver that could spur prices higher sustainably. Gold and silver gained in the latter half of the day, as safe-haven appetite improved slightly; both metals now trade at $1,989/oz and $24.00/oz, respectively.
All price data is from 03.04.2023 as of 17:30