US stocks strengthened today, with regional banks leading momentum higher, but market sentiment remains cautious overall. With the Fed approaching a possible pause in June, pressures are mounting for a rate increase in July. At the same time, the recent monetary policy decisions from other key central banks offer some foresight as to what US officials have in store in the coming months. In particular, the RBA, the central bank that was forecast to keep the rates unchanged, increased its cash rate by 25bps in June, opening the door to further hikes and putting markets on edge for further action elsewhere. We believe that the Fed's approach is to move gradually and adjust market expectations ahead of the decision-making process. The dollar jumped back above 104, and the 10yr US Treasury yield held firm above 3.70%. The euro weakened while German bonds extended gains after the ECB stated that consumer inflation expectations fell to 4.1% from 5.0% for the next 12 months.
China extended the purchase tax exemption for NEVs until the end of the year. This marks another push from Chinese policymakers to support the economy, and we have seen a greater emphasis on the construction sector from releases in recent days. That, however, failed to lift prices significantly higher, and we expect that markets are paying more attention to the current economic performance in favour of potential policy prospects in regard to base metals outlook. Iron ore, which is China's industrial proxy, benefitted from the news, pushing prices to close above $105/mt at $106.37/mt. Zinc followed suit, gaining marginal ground to settle at $2,319/t. On the other hand, aluminium weakened below the support level of $2,220/t to close at $2,210/t. Copper remained unchanged at $8,339/t.
Oil futures eased slightly following yesterday's gains driven by Saudi Arabia supply cut; WTI and Brent now trade at $72/bl and $76/bl. Gold and silver remained unchanged at $1,961/oz and $23.50/oz, respectively.
All price data is from 06.06.2023 as of 17:30