US stocks fluctuated, edging slightly lower as another day ended without the resolution of debt-ceiling talks. The dollar is trading comfortably above 103.0, and the US 10yr Treasury yield strengthened to 3.73%, highs not seen since February. In economic views, US new home sales rose to the highest level since March 2022, and prices declined as markets benefitted from the pause in mortgage rate expectations. Meanwhile, business activity jumped to 54.5 in May’s preliminary figures, supporting the gains in the composite index, pushing it to an over-a-year high. European stocks were weaker after similar data pointed to a further contraction in manufacturing activity, despite showing marginal improvement on a month-on-month basis; services softened slightly.
Base metals continued to decline today, falling back to robust support levels after last week’s moderate gains, keeping the trading broadly rangebound. Aluminium declined to the support of $2,220/t before edging slightly higher to $2,227/t. Copper fell to test the $8,100/t level, closing at $8,102/t. Zinc continued to weaken to new lows, closing at $2,372.50/t; lead remained broadly unchanged at $2,073/t. Cash to 3-month spreads have weakened in recent weeks as demand optimism out of China continued to weaken. In particular, the copper spread continued to decline, falling to the lows of -$70.00/t, the level not seen since the early 2000s; we suspect that markets are pricing in lower demand expectations out of China as supply remains broadly unchanged.
Oil futures jumped higher after the news that Saudi Minister warned the short sellers, pushing WTI and Brent up to $73/bl and $77/bl. Gold and silver edged lower to $1,967/oz and $23.40/oz, respectively.
All price data is from 23.05.2023 as of 17:30