US stocks weakened today, erasing most of yesterday’s gains as shares of regional banks came under heavy selling pressure after the rescue of First Republic failed to alleviate investor fears. JOLTS job report showed the third consecutive month of declines, with the March figure at 9,590k, the lowest level in nearly two years. The dollar found support at 102. The 10yr yield remained unchanged, while the 2yr sold off by more than 22bps, falling back to the 4.0% level. Our base case is for the Fed to hike by 25bps tomorrow, in line with forward swap estimates. Elsewhere, Eurozone core inflation eased slightly to 5.6% y/y as the headline figure ticked up to 7.0% y/y. The markets are now pricing in 25bps from the ECB; however, we are of the opinion that we might see two more 25bps hikes from the ECB before the pause takes place. With central bank meetings out of the way this week, we expect less emphasis on inflation and labour market readings, and instead, greater focus should be on economic growth data, sentiment, and consumer resilience, such as retail sales.
Base metals performance diverged across the complex today. Copper gained 3.0% over the weekend; however, it quickly erased these gains, as resistance at $8,700/t triggered a risk-off momentum back to $8,514/t. Zinc also struggled above $2,660/t, falling back to the recent lows of $2,660/t; the metal closed at $2,609.50/t. Aluminium remained broadly unchanged at $2,366.50/t. Iron ore futures remained low, at around $100/mt, as a continued lack of demand from stainless steel mills brought prices from February highs of $130/mt. We suspect that only when output cuts by the mills are deep enough to offset the decline in demand, the prices of raw material can bottom out and recover. For the rest of the base metals group, trading remains range-bound, and in order to create a strong momentum in either direction, futures must break out of the current ranges.
Oil futures sold off more than 4.0% amid the thinnest trading volumes this year, as macro data weighed on demand outlook WTI and Brent now trade at $72/bl and $75/bl. Gold and silver strengthened today as safe havens; gold and silver edged higher to $2,014/oz and $25.37/oz, respectively.
All price data is from 02.05.2023 as of 17:30