US stocks strengthened once again, with S&P 500 posting the fifth consecutive day of gains ahead of the Fed meeting today. Softer producer prices, which grew by 1.1% y/y in May, have once again highlighted that inflationary pressures is softening at a solid rate. Policymakers are expected to pause the rates today; however, bets for the July hike are still present, although diminished since the start of the week, and now the market is pricing in interest rates to peak in September instead of July. The 2yr and 10yr Treasury yields remained broadly unchanged. The dollar sold off below 103. China’s key economic indicators are being released tomorrow, and we expect the figures to start to show a genuine picture of the economy’s environment as post-lockdown appetite is subsiding.
Base metals’ gains accelerated today, and construction-heavy materials were once again the beneficiaries of risk-on sentiment. In particular, nickel jumped higher for the second straight day, breaking above the $22,000/t level to close at $22,720/t. Zinc rallied sharply as additive impacts of macro and fundamentals pushed the metal to test the $2,500/t level before closing at $2,486.50/t. Zinc has been one of the worst-performing metals so far this year, putting further pressure on European smelters that have been struggling energy pricing risks since the start of last year. Lower prices have diminished smelters’ profit margins, threatening further closures; this winter season should prove the most challenging for zinc production, as higher energy prices could stall the reopening of capacity. Aluminium and copper gained marginal ground to $2,253.50/t and $8,509/t, respectively.
Oil futures struggled to hold up earlier gains, with WTI and Brent closing marginally unchanged. Gold and silver strengthened into $1,956/oz and $24.00/oz, respectively.
All price data is from 14.06.2023 as of 17:30