US stocks strengthened today following better-than-expected economic data releases. Retail sales advanced for another straight month, growing by 0.6% m/m, vs. the expected 0.1%. Labour market data also pointed to continued tightness, with initial jobless claims edging slightly higher to 220,000 in the week ending September 9th. The dollar continued to strengthen above 105, and the 10-year US Treasury yield held firm. Elsewhere, the ECB executed the 10th consecutive hike in its tightening cycle, pushing the interest rate to the new high of 4.0%. The euro sold off as the market began to price in the last hike of the tightening cycle, and we expect the euro's strength to diminish in the near term. Moreover, we expect that once inflation falls closer to the target, market jitters regarding the cuts will intensify. We believe the actual cuts will be in short supply, and a higher-for-longer interest rate environment will prevail over the H1 2024.
Base metals complex strengthened marginally today after the PBoC cut the reserve requirement ratio by 25bps, marking the second reduction this year. Whilst the move is another indicator of government commitment to support the economy, market response remains muted. We see that, while positive news out of China is supporting positive momentum on the day of the release, each incremental impact on base metals pricing is diminishing, given a continued deterioration of market confidence in economic recovery this year. Aluminium jumped higher, testing the $2,230/t level before returning back to the current ranges, closing at $2,224.50/t at the time of writing. Likewise, copper tried to test price levels above $8,460/t but struggled above that level and returned to $8,417.50/t. Zinc, on the other hand, breached the psychological resistance level of $2,550/t to close at a May high of $2,570/t.
Oil futures jumped higher once more on fundamental market tightness, with WTI and Brent trading above $90/bl and $93/bl. Gold and silver remained broadly unchanged.
All price data is from 14.09.2023 as of 17:30