US stocks extended yesterday’s losses as expectations of higher-for-longer interest rates continue to drive bond yields higher. The 10-year US Treasury yield increased to 4.88%, while the dollar appreciated against other major currencies and stood at 106.4. Initial and continuing claims data due tomorrow will help gauge the state of the labour market in the tight monetary policy environment. While the US economy has proven resilient so far, we expect more economic data coming out softer as we get closer to the end of the year. Elsewhere, the CPI figures from both the Eurozone and the UK prove that inflation remains sticky in Europe at 4.3% YoY and 6.7% YoY, respectively. Such an elevated figure puts pressure on the BoE to keep interest rates high even with the risks of recession rising.
Conversely, China's GDP data pointed to a higher-than-expected economic growth in Q3’23 at 4.9% YoY, compared to the prediction of 4.5% YoY as industrial production remained flat at 4.5% YoY in September, while retail sales increased to 5.5% YoY from a 4.5% reading in August. While consumer spending exceeded expectations, the housing market continues to feel the brunt of the decline, making economists downbeat on growth expectations for next year. The base metals complex responded positively to the data; however, gains were muted, and we expect to see mean-reverting strategies at play in the coming months. Aluminium and copper held above $2,170/t and $7,960/t today, respectively. Meanwhile, lead continued to gain ground, closing at $2,101.50/t; we believe the recent robust weakness is being reversed. Zinc settled unchanged at $2,436.50/t.
Oil futures jumped higher after Iran called for an immediate embargo against Israel, pushing WTI and Brent higher to $87/bl and $91/bl. Gold and silver remained broadly unchanged on the day at $1,944/oz and $22.80/oz, respectively.
All price data is from 18.10.2023 as of 17:30