US stocks declined after the release of key labour market data which indicated further tightness in the jobs market. Nonfarm payrolls in the US rose by 336,000 jobs in September, which exceeded expectations; however, unemployment remained at 3.8%. The 10-year yield rose to retest the high of 4.80%, but the dollar struggled to maintain its rally and fell back to 106.0. Meanwhile, forward swaps remained largely unchanged in their expectations of a hike in November and December, with only a 1 basis point increase in the former over the course of the week. The probability of a hike stood firm at 30%. We do not see the labour data impacting the market’s view on further monetary policy tightening from the Fed as we believe that this tightness is already priced in.
Base metals strengthened today, with the upside moderated by a strong labour data performance from the US. Copper followed a recent trend of marginal downside this week, breaking below the $8,000/t level. The next robust support level stands at $7,867/t, which is a May low, and this level held firm today, causing copper to strengthen back above $8,000/t. We expect this level to be retested next week; however, the likelihood of a break below it is diminishing. Aluminium remained unchanged at $2,239.50/t. Lead and zinc reversed earlier losses, closing higher at $2,143.50/t and $2,509/t, respectively. With Chinese investors returning from holidays, we expect near-term volatility to remain ample in the coming week. Over the longer term, favourable domestic policies in China drive prices upward, but the effects tend to be short-lived, and prices follow a mean-reverting strategy.
Momentum in oil futures stalled today. Gold and silver rebounded despite resilient macroeconomic releases, indicating that the market may be returning to neutral momentum after being oversold. Both metals are currently trading at $1,823/oz and $21.30/oz, respectively.
All price data is from 06.10.2023 as of 17:30