US stocks edged higher today ahead of a data-filled week. In particular, labour releases, PCE and GDP are also expected to remain strong, highlighting softening yet robust economic performance. Meanwhile, Powell's comments last week were slightly more hawkish, raising the expectation for a higher-for-longer interest rate narrative. Still, we do not expect to see another hike take place this year unless strong data suggests otherwise, and the September pause is now fully priced in. The dollar remained robust above 103.50 despite later weakness, while the 10yr US Treasury yield is now at 4.13%. We expect that the bond market will lead the way in the coming months without a need for a strong narrative to drive performance. The path of global economic slowdown is becoming more apparent, and with further easing in inflationary pressures, we expect the mood to sour going into Q4 2023.
Broadly positive momentum was seen across the base metals today, trading mostly rangebound, in line with last week's performance. Only zinc continually traces higher, closing above $2,400/t at $2,440/t. Aluminium retested the support level of $2,150/t before bouncing back up to $2,168.50/t; copper fluctuated around $8,400/t. Lead was seen piercing the $2,150/t support level before closing higher at $2,191.50/t, with a longer lower wick suggesting that a downside appetite is building below the robust support level. Nickel's trading remained lacklustre. Last week's volatility was lower ahead of the long weekend, creating low market risk for this week. Chinese officials pledged on Monday to strengthen policy support and speed up government spending. The Chinese economy continued to soften, with forecasters trimming their growth expectations. China has already cut policy twice this year, and regulators took steps to ease property restrictions; now, the focus has shifted to broad support measures. Despite souring Chinese outlook, negative news seems to make little difference to the price narrative, and we expect the market to trace sideways into early September, when the volatility usually picks up.
Gold and silver jumped higher after dollar weakness in the latter half of the day, strengthening into $1,936/oz and $24.77/oz, respectively.
All price data is from 29.08.2023 as of 17:30