US stocks started the week on the back foot as bonds and the dollar reversed last week’s trends. The dollar shot up higher to the 103.70 level, and the 10-year US Treasury yields came back up to 4.30%. Friday’s comment from the Fed’s Powell helped to reverse the sentiment over the weekend; however, we believe that the market is oversold, and this should eventually balance out. There seems to be a battle between policymakers and the markets, with the former attempting to stop investors from speculating on the path of cuts. By lowering the yields, markets are doing the work of the Fed by reflecting several next year’s cuts already in November. We expect that this is slightly premature, and yields should edge slightly higher in the medium term. The macro calendar is quiet this week, with US factory orders and labour data, which we do not see impacting the markets too much. With the blackout period from the policymakers, we expect volatility to die down and markets to trade in a narrower range this week.
A stronger dollar drove a strong risk-off sentiment across the base metals complex, with metals coming off aggressively overnight, giving up most of the gains they made on Friday. On copper, today’s correction seems like a slight retracement on November’s trend, and with the trend support remaining intact, prices are likely to remain elevated above $8,400/t in the meantime. Aluminium continues to test the $2,200/t level, closing slightly below it at $2,182/t. Lead’s downside has been relentless, pushing prices below another robust support of $2,100/t to settle at $2,093.50/t. Zinc is also seen creeping lower, settling below the $2,450/t level at $2,453/t. We expect that with the end of the year approaching, the market will be in a de-risk mode.
Oil futures continued to edge lower, with WTI and Brent now trading at $73/bl and $78/bl, respectively. Gold breached a record high of $2,100/oz this morning, however, struggled to keep these levels, selling off to $2,025/oz. We see that there is still little fundamental incentive to push gold above this level decisively – the confirmation of an actual cut from policymakers might prompt gold higher. But in the meantime, we expect it to test the $2,100/oz resistance in the near term.
All price data is from 04.12.2023 as of 17:30
