US stocks rose today, with AI companies driving the upside, helping to outweigh downward pressures from debt-ceiling discussion concerns. From a macroeconomic perspective, US initial jobless claims remained in the lower ranges of 229,000 in the week ending May 20th, below market expectations. Meanwhile, US GDP Q1 performance was revised higher to 1.3% annualised pace; still, average GDP and GDI figures are showing that the economy is losing momentum from the impacts of tighter monetary policy and elevated inflation. On the other hand, Germany dipped into a technical recession in Q1 after contracting by 0.3% and 0.0% q/q over the last two quarters. Despite the mixed economic performance, both Fed and the ECB saw the bets for a further tightening increase in recent days, with 22bps and 44bps of hikes priced over the next two meetings, respectively. The dollar breached the 104 level, and the 10yr yield is now at 3.78%.
Base metals strengthened slightly today, recovering some of yesterday’s losses, despite continued worries over China losing momentum. This underscores our belief that recent downside moves are mostly sentiment driven, and a lack of positive news out of the region is weighing on demand expectations. In particular, the construction sector is continuing to underperform, with zinc the only metal struggling to push higher today, closing near new lows of $2,272/t. Given the majority of its demand coming from galvanised steel usage, zinc, unlike nickel, has little fundamental support in the meantime. Some dip buying might take place at these levels, but we do not anticipate these moves to be large, given that market players have enough buffer stock. Aluminium tested the support at $2,200/t once again but struggled below it before pushing higher to $2,2231t. Copper strengthened but still struggled to break back above $8,000/t; the metal closed at $7,962.50/t. Lead closed at $2,074/t.
Oil futures sold off after OPEC+'s decision to keep the output unchanged; WTI and Brent now trade at $71/bl and $75/bl. Gold and silver pared further declines to $1,944/oz and $22.8/oz, respectively.
All price data is from 25.05.2023 as of 17:30
