After what should have been a volatile event over the weekend, markets were quiet on Monday; S&P 500 is marginally lower, and Eurostoxx managed to recover losses seen earlier in the day. We suspect to see heightened risks from the equity space this Friday, given the last-day-of-the-week effect but also the last day of the second financial quarter. Moreover, EU CPI and US PCE should help guide the narrative for central banks’ tightening cycle this week. The dollar wavered around 102.70, and the 2yr US Treasury yield’s gains began to slow at around 4.75% level. While we remain cautious about the case for further tightening from the Fed, we expect to see further dollar strength leading up to the July meeting as markets continue to price in a hike.
Base metals saw protracted selling pressures across the board on Monday, despite increased volatility seen in Russia over the weekend, as data continued to point to further spending weakness out of China. Given last year’s move away from the region dependence and the growing presence of geopolitical hedges in portfolios, the volatility came in lower than expected. Instead, spreads continued to tighten, with tin cash to 3-month remaining above $1,400/t, and copper strengthening further into backwardation to $21.50/t. For the outright prices, we see a soft landing in metals as stimulus optimism fades. Aluminium continued to decline, falling further into recent lows of $2,142/t to close at $2,148.50/t. Copper fluctuated around the $8,400/t area, closing at $8,391/t. Other metals saw a sharp fall in prices, with lead losing as much as $53/t to settle at $2,069.50/t. Nickel breached the support level of $21,000/t to close at $20,305/t, the lows not seen since the end of May; this support level has held firm in the past.
Oil futures edged higher as traders did not price in any prolonged risks from Russian production; WTI and Brent are now trading at $69/bl and $74/bl. Precious metals held on to earlier gains, with gold and silver trading marginally higher at $1,927/oz and $22.85/oz, respectively.
All price data is from 26.06.2023 as of 17:30