US stocks slumped today as the debt ceiling discussion came to the forefront of market sentiment. Bond markets are quiet after the Fed, and the ECB hiked by 25bps last week. The ECB is expected to continue with their hiking cycle, as policymakers reiterated that battling inflation remains paramount, and they remain behind the curve. Whilst headline inflation is declining, the core remains sticky, and we could see two more 25bps hikes over the next two meetings, especially if exogenous events happen. Tomorrow’s CPI print from the US should influence markets less than in previous releases, given little outlook change for the Fed’s policy path. Instead, any data that suggests that inflation is not subsiding as quickly as expected would price out any price cuts instead of further tightening from the Fed. The dollar strengthened, and the 10yr US Treasury yield remained close to 3.50%. We expect the BOE to deliver 25bps on Thursday.
Data out of China pointed to continued trade weakness out of the region, as imports slumped and export growth slowed in April, with year-on-year growth at 8.5% and -7.9%, respectively. That left a trade surplus of $90 billion for the month. Still, autos led the jump in shipments, doubling y/y in the first four months. Steel exports rose by 33%. The support at $100/mt held firm for iron ore futures. Nickel futures weakened sharply, falling below the support of $23,610/t to close at $23,560/t. Other metals saw moderate declines as they drifted near the robust support levels. Aluminium and copper remained unchanged at $2,319.50/t and $8,599.50/t.
Oil futures declined more sharply than base metals on the back of China trade data, with WTI and Brent trading at $71/bl and $75/bl. Gold and silver futures remained unchanged at $2,025/oz and $25.50/oz, respectively.
All price data is from 09.05.2023 as of 17:30