The US market steadied after data releases today eased some of the pressure for further hikes from the Fed. This was also reflected in diminishing expectations of a hike in November, now at 20% vs. 28% earlier this week. ADP report, which is considered to be a preliminary look at employment data before a more detailed release on Friday, pointed to the smallest monthly number of hired workers since January 2021. The reading stood at 89k, well below expectations of 150k and much lower than the 177k recorded in August. The markets await unemployment rate data on Friday, which will paint a better picture of the current state of the US labour market. While the US economy has remained robust in the face of tight monetary policy, we expect further softening in the labour market in the coming months. Meanwhile, the service industry gauge pulled back slightly to 53.6; whilst still expansionary, this is the lowest level so far this year. Easing economic demand expectations failed to majorly reverse some of the pressure that the yields and the dollar have been feeling. We still remain constructive on these assets; however, we expect to see some moderate softness in the near term, given the sharp rally seen in recent days. The 10yr yield found support at 4.74%. After a steady performance yesterday, the dollar edged lower today and stood below 107.
Weakness continued in the base metals market today, with aluminium fully offsetting recent gains, coming back to pre-spike ranges of $2,170/t and $2,250/t, respectively. Copper breached the psychological $8,000/t level to fall to $7,949.50/t – the level not seen since May, when the support level at $7,867/t held firm. Nickel remained unchanged at $18,723/t. Lead and zinc saw the declines slow down to settle at $2,117.50/t and $2,493/t, respectively. With the Chinese investors coming back from holidays next week, we expect the near-term volatility to remain ample; still, the recent trend of marginal downside is likely to persist in the meantime.
Oil futures sold off after weaker economic data releases, erasing most of the gains made in September; WTI and Brent are now trading at $85/bl and $87/bl. The strong bond yield and dollar performance continue to exert some downside pressure on precious metals, keeping gold and silver low at $1,820/oz and $21.00/oz, respectively.
All price data is from 04.10.2023 as of 17:30