US stocks declined as tech shares weakened ahead of the key inflation reading tomorrow. Moreover, higher energy prices, in particular, a 40% surge in European natural gas and a 6% jump in oil futures, added to the inflationary concerns. The dollar held firm, and the 10yr US Treasury yield hovered near 4% before the anticipated bond auction. Elsewhere, the Chinese economy slid into deflation in July, adding pressure on policymakers to boost monetary and fiscal support even with potential signs that prices decline might be temporary may dampen any stimulus. The CPI fell by 0.3% y/y, marking the first yearly decline since February 2021. Producer prices also fell by 4.4%, in line with expectations.
Despite the weakened macro environment in China, base metals prices were little changed as robust support levels held firm. Aluminium traded around the $2,200/t level today before settling slightly below at $2,195/t. Likewise, copper struggled below $8,400/t, underscoring our view of prices being supported by the cost of production levels. We expect to see continued drift sideways in the meantime. Nickel, on the other hand, continued to decline, testing the $20,500/t level and closing at $20,554/t. Lead and zinc remained broadly unchanged at $2,127/t and $2,479.50/t, respectively.
Oil futures jumped higher on the back of continued supply tightness, with oil futures reaching a year high of $83/bl and $86/bl for WTI and Brent, respectively. Gold and silver continued to drift lower into $1,916/oz and 22.68/oz.
All price data is from 09.08.2023 as of 17:30