US stocks strengthened at the start of a week packed with economic data releases. UK inflation figure due on Wednesday will likely influence the rhetoric of the BoE at their meeting in November, while the Eurozone CPI data coming out on Thursday will confirm the state of the single currency area’s consumer market. Price pressures remain sticky in the UK, with the expectations of a 6.5% YoY reading this week. As of now, the markets are pricing in a 50% chance of another BoE interest rate hike by the end of the year. The 10-year US Treasury yield edged higher today and stood at 4.7%, while the dollar retraced slightly against major developed economies, falling below 106.4.
The PBOC injected liquidity support into the banking system but kept its 1-year rate unchanged. We expect that this will reduce the probability of commercial banks trimming their corporate prime loan rate on Friday. Still, the base metals complex struggled to improve strongly today, continuing to trade in line with last week’s trend. Aluminium weakened for the fifth straight day, breaching the support level of $2,200/t to close at $2,180.50/t. Copper, on the other hand, struggled below Friday’s lows of $7,930/t, remaining close to the $8,000/t level at $7,976.50/t. Likewise, lead found support at $2,050/t today, settling at 42,073/t. Zinc was marginally lower at $2,446/t. We expect that the Chinese economy bottomed out in Q3, and September figures should come in marginally lower YoY. However, this softness is expected to slow compared to previous months. Our view is that sentiment in China remains worse than actual fundamentals, and we expect the view to turn from oversold to neutral in the coming months. This should help create fundamental support for Q4, from which the economy will recover in 2024.
Oil futures remained elevated but unchanged day-on-day. Although all eyes are on the conflict in the Middle East, we do not expect a significant upside in safe havens, particularly gold. While the trend reversed at the start of the conflict, the metal is now back to pre-sell-off levels, and we do not expect it to post any robust gains in the near term. Both gold and silver hovered at around the $1,920/oz and $22.65/oz levels, respectively.
All price data is from 16.10.2023 as of 17:30
