US stocks edged higher on Monday, with equity markets holding back on the scale of the move given it is the last trading day of the month. With most of the central bank decisions out of the way, investors will watch out for another busy week of earnings results, with BOE’s decision set to take place on Thursday. The dollar held firm above 101.50, and the 10yr US Treasury yield is back below 4.0%. Meanwhile, lower Euro area flash inflation and GDP from major bloc’s economies have brought down the expectations of another ECB hike this year, with forward swaps only pricing in 17bps into the year-end. Lagarde has suggested that a pause in September might be followed by a hike later on in the year. However, given the ECB is behind the curve, the end-of-year outlook remains unclear. Volatility should be slightly higher this week as markets digest the impacts of the latest central bank decisions, and continued repricing should take place in regard to the year-end outlook.
Macro-sensitive base metals prices gained ground today on the back of stimulus optimism out of China. The nation’s top economic planning agency released a wide-range policy document targeting the removal of consumption restrictions and improvement of infrastructure and other events. While this stimulus is aimed at consumers, it is unlikely to stimulate consumption in the near term. Weak consumer confidence remains a key driver in slower demand, and while supply conditions should improve, we do not expect this to drive base metals prices higher in a sustainable way. At the same time, the impact of the dollar as a headwind is lessening, but with poor summer liquidity and Wednesday expiry, volatility should rise. Aluminium gained as much as $66/t during the day, jumping above the resistance level of $2,250/t to close at $2,282.50/t. Likewise, copper strengthened but struggled to breach the trend resistance level that has formed in recent weeks, which is now holding at $8,870/t. Zinc continued to gain ground, breaching the robust resistance of $2,500/t to close at $2,565/t, the May high. Lead and tin remained broadly unchanged, settling at $2,149/t and $28,637/t, respectively.
Oil futures edged higher to $81/bl and $85/bl. Gold and silver shot up to $1,970/oz and $24.80/oz, respectively.
All price data is from 31.07.2023 as of 17:30