US stocks weakened today despite the Fed keeping the rates unchanged, as policymakers see another hike by the end of the year. We believe that this narrative is helping to prop up the higher-for-longer interest rate environment; however, we see a number of potential headwinds until the end of the year that could avert the necessity for another hike. Markets have repriced their expectations accordingly: forward swaps see 12bps of tightening take place into the year-end, suggesting that investors are not yet entirely convinced of another full-fledged hike. We expect this to weigh on risky assets in the meantime, but the impact is to lessen as we head into the next meeting in November. The dollar remained robust but fluctuated around 105.30, and the 10yr US Treasury yield is now close to 4.50%. Meanwhile, initial jobless claims pointed to continued tightness in the labour market, growing 201,000 in the week ending September 16th. Elsewhere, the BOE surprised investors by pausing the rates today, following the softer inflation print; the pound, however, continued to soften.
Base metals weakened following the Fed’s announcement. The risk-off sentiment helped to push nickel below the robust support level of $19,500/t to close at $19,123/t, marking the low not seen since July 2022. Likewise, lead weakened below $2,200/t to close at $2,183.50/t; a big jump in lead stocks on the LME helped to alleviate some of the tightness that we have seen in the market in recent months. The cash to 3-month spread is now back at $1.0/t backwardation, down from $64.0/t seen a few weeks ago. We believe that the path for further weakness will largely depend on SHFE's price performance in the near term. Zinc remained largely unchanged at $2,514/t. Copper tested prices below the $8,100/t support level; however, it struggled below it and returned to $8,194/t – back within the recent range.
Oil futures continued to climb higher, supported by a Russian diesel ban announcement, pushing WTI and Brent to $90/bl and $94/bl. Gold and silver remained unchanged.
All price data is from 21.09.2023 as of 17:30