US stocks softened today after a new batch of data confirmed the continued softness in the economy, reinforcing the market's belief that the tightening cycle is coming to an end. The sentiment of US homebuilders fell to the lowest level this year as high interest rates led to elevated in mortgage rates, causing prospective buyers to pull back. Factory production also dropped by 0.7% m/m, which was worse than the expected -0.4%, largely due to automaker strikes in October. While historically, the labour market remains tight, the initial jobless claims continued to rise, and short-term momentum is likely to continue to weaken. Our expectations for the data remain in line with our previous forecasts, suggesting that several headwinds will continue to impact the market towards the year-end, weakening the case for further interest rate hikes from the Fed. Once peak rates are factored in, we expect the focus to shift to economic growth indicators, and we see further softness in risky assets in the short term. Treasury yields remained at the bottom of the trading range, while the dollar fluctuated around 104.30.
Most base metals weakened today, while lead continued to strengthen for the third straight day, reaching close to September highs of $2,300/t before settling at $2,283/t. Zinc, on the other hand, sold off today following the addition of 65,075mt of material on the LME exchange, bringing total closing stocks back to the September level. Aluminium and copper also softened slightly today, keeping the mean-reverting strategy intact at $2,215.50/t and $8,220/t, respectively. Meanwhile, nickel is once again seen retesting the $17,000/t support level.
Oil futures sold off as swelling crude inventories pushed prices below the technical levels of $75/bl and $80/bl for WTI and Brent, respectively. Gold and silver continued to strengthen as investors factored in the end of the tightening cycle from major economies; both metals are now trading at $1,984/oz and $23.90/oz.
All price data is from 16.11.2023 as of 17:30