US stocks strengthened slightly today as investors continued to keep a close eye on debt auctions. Bonds have had their best month since March, with Treasury yields continuing to drop. The Treasury yields have continued to decline, with a 10-year yield remaining below 4.50%; a 30yr yield is now at 4.60%. Markets have continued to price in the peak rates from key central banks, shifting expectations of cuts further forward. Eurozone and the US are now pricing in 37.5bps of cuts until June. The UK is seen cutting ahead of the Fed. This week, the ECB minutes will be watched for the bank's outlook in regard to monetary policy moves. We expect that recent inflation softness has brought down expectations of another hike, although a higher-for-longer narrative is likely to hold true into Q2 2024 to help keep yields elevated. The lower inflation narrative is supported by the high base of growth seen in late 2022 and early 2023. Especially the core good category remains the biggest driver behind price softness, and we expect price growth in this sector to remain low in 2024, contributing to substantially lower headline and core inflation. On the other hand, we have seen data out of developed regions point to continued softness, and this week's composite PMIs are likely to reaffirm this narrative. Until the end of the tightening cycle is truly priced in, we expect risky assets to be driven by the central bank narrative. Only then any downside news could weigh on assets rather than elevate them. The dollar remained low at 103.50.
We have seen bigger upside moves across the base metals complex, supported by a weaker dollar. Overall, we are becoming slightly more bullish for metals in the coming weeks. As mentioned in our latest QMR, we believe that Chinese pessimism is now fully reflected in the price, and momentum could change to account for fundamentals, which point to a softer-than-expected but still resilient economic performance. With our expectation of a marginal rebound in economic growth next year, we believe investors will begin to price in this outlook in the near term. Aluminium jumped higher but struggled to break above the robust resistance of $2,250/t, closing at $2,245.50/t. Copper, on the other hand, managed to breach September highs of $8,300/t to strengthen to $8,430.50/t. Nickel continued on its downward path, testing the $17,000/t level once again. Lead and zinc remained broadly unchanged, with the former pausing following the recent rally; both metals settled at $2,275/t and $2,563.50/t, respectively.
Oil futures extended their advance with all eyes on the OPEC+ meeting this weekend. Gold and silver softened slightly to $1,973/oz and $24.50/oz, respectively.
All price data is from 20.11.2023 as of 17:30
