Risk-off sentiment trickled across the market today as yields rose, given another hot labour data print. At the same time, the US Treasury stated that it would sell $103bn in longer-term securities at its refunding auction, a day after the US was downgraded by Fitch Ratings, which criticised the ballooning fiscal deficit and an erosion of governance. This has once again heightened the risk of the banking crisis, the escalation of which we have seen earlier this year. However, we do not expect to see risks bubble to the surface just yet. The dollar continued to strengthen, and the 10yr yield is now at November highs of 4.08%. US private payrolls increased by 324,000 in July, exceeding market expectations, and all eyes are on the monthly jobs report this Friday to gauge the labour market performance in July.
The momentum carried through the base metals complex today, with another day of strong losses across the board. Aluminium fell back to test the support level of $2,200/t before settling above it at $2,209/t. Likewise, copper broke the $8,600/t level, but the longer-term trend support is holding firm at $8,520/t. Tin continued to weaken, losing $1,750/t over the course of three days, but prices struggled to break the $27,000/t level after testing it, closing at $27,418/t. Lead was the only exception, gaining marginal ground to close at $2,146.50/t.
Oil futures weakened sharply despite data pointing to US crude stockpiles declining by a record 17m barrels last week, indicating growing market tightness in the face of OPEC+ cuts. WTI and Brent are now trading at $79/bl and $83/bl. Gold and silver weakened to $1,935/oz and $23.70/oz, respectively.
All price data is from 02.08.2023 as of 17:30
