US stocks weakened today following higher-than-expected inflation data, which led the markets to reprice their expectations of the Fed’s first interest rate cut in March. The headline Consumer Price Index (CPI) accelerated to 3.4% YoY in December from 3.1% YoY in the previous month, suggesting that underlying price pressures persist. While inflation has softened significantly from the highs seen in 2022, the persistent tightness in the labour and consumer markets is expected to pose challenges in reducing the rate to below 3% in the coming quarter. The forward swaps are now pricing in a 68% chance of an 18bps cut at the Fed’s meeting in March. Upon the release of the data, both the dollar and the 10-year US Treasury yield jumped higher, trading at 102.67 and 4.0%, respectively.
Today’s CPI move on the upside caused some additional volatility during the day, in line with our expectations, but that failed to move the prices significantly during the day. Aluminium remained broadly unchanged at $2,235/t, while copper tested $8,400/t; the metal struggled above this level, closing at $8,355/t at the time of writing. Lead continued to make further gains, settling just below $2,100/t at $2,095.50/t.
Gold fluctuated today, edging slightly higher to $2030/oz, while silver declined to $22.75/oz. The ongoing crisis in the Red Sea has pushed oil prices higher, with WTI and Brent trading at $73.23/bl and $78.54/bl, respectively.
All price data is from 11.01.2024 as of 17:30
