US stocks fell as the recent bull run exhausted itself today; S&P 500 struggled above 4,450. The main risks for this week are the political meetings between China and the West, UK CPI on Wednesday, and, subsequently, the BOE meeting on Thursday. The BOE is in a tough spot, and we expect inflation to soften marginally, further ramping up the stakes for higher rates. Despite the UK economy being more sensitive to interest rate hikes, given the big presence of the construction sector, the stagflation environment is more likely to materialise in comparison to other developed nations. The market is pricing in 130bps from now until the end of the year, but it is unlikely we will see a proportional increase in rates. However, expectations of further tightening are likely to weigh on economic prospects in the meantime. The dollar edged higher to 102.50, and the 10yr US Treasury yield held steady at 3.76%.
Base metals’ prices were softer today, given a lack of positive news out of China. We think the market is getting a bit impatient with the China stimulus story. While the message from policymakers has been clear, it will take time before it is fully implemented into the economy, and we expect to see fewer policy statements in the coming weeks and instead increased participation from provincial officials refining the stimulus measures announced last week. Moreover, we have seen bigger moves on spreads, especially for aluminium and copper, and fluctuations in stocks have added to spread volatility. We do not expect it to drive the price narrative in the meantime. Aluminium weakened after the resistance at 50 DMA held firm, and the metal settled at $2,241/t. Copper also struggled to break above Friday’s high of $8,634/t, edging slightly lower to $8,540/t. Nickel and zinc losses were more abrupt, given last week’s protracted gains, closing at $22,503/t and $2,437/t at the time of writing.
Oil futures fluctuated, with WTI and Brent trading at $71/bl and $76/bl. Gold and silver weakened slightly to $1,950/oz and $24.00/oz, respectively.
All price data is from 19.06.2023 as of 17:30