US stocks saw another day of lacklustre moves as markers await the CPI data to be published tomorrow. The 2yr and 10yr yields both continued to soften, while the dollar broke support of 102. While inflation is set to continue cooling at a healthy pace, core readings have remained upwardly sticky and put further pressure on the Fed to tighten monetary policy. The 25bps for July has been pretty much priced in by markers, but the following meeting in September is now up for debate, with only 7bps seen through forward swaps pricing. Meanwhile, the Bank of Canada is likely to increase interest rates for the second consecutive meeting, which would bring inflation to highs not seen in 22 years.
Calls from the Chinese President to open up the economy and encourage foreign investment today have boosted sentiment across base metals today; however, this momentum struggled to last, and prices have continued to soften, following the longer-term trend. We believe that until we see a recovery from the second-largest economy portrayed in a sustainable way, metals should continue to drift lower. While markets still look out to China to gauge the outlook for metals this year, we are likely to see the market recalibrate their expectations towards a more balanced approach, with both Europe and the US domestic and macro outlook taken into consideration. Aluminium was one of the metals that continued to see upside momentum, gaining ground for the third straight day, breaking above the $2,150/t resistance once again to close at $2,168.50/t. Meanwhile, copper struggled above $8,400/t to close at $8,322.50/t. Lead and zinc maintained their current ranges, closing pretty much unchanged at $2,052/t and $2,356/t, respectively.
Oil futures, alongside iron ore, responded positively to China’s optimism and strengthened; WTI and Brent are now trading at $74/bl and $79/bl. Gold and silver remained unchanged at $1,930/oz and $23.10/oz, respectively.
All price data is from 11.07.2023 as of 17:30