After yesterday's losses, US stocks opened higher today. The Federal Reserve's statement yesterday aligned with expectations, indicating that the federal funds rate would remain unchanged until further data confirms inflation is on a stable trajectory toward the 2% target. Jerome Powell, the Federal Reserve Chair, expressed increased confidence in inflation softening, noting the resilience of the US economy allows the Central Bank to avoid hasty monetary policy easing. Investors are now more confident that the first interest rate cuts will materialise in May, driving 10yr US Treasury yields lower to 3.88% level. Labour data released today showed a slight uptick in Continuing and Initial Jobless claims, yet these figures continue to hover at historically low levels. Additionally, the final S&P Global US Manufacturing PMI exceeded expectations at 50.7, indicating that US factory activity remains in the expansion phase despite the extended period of elevated borrowing costs. In the UK, the Bank of England maintained interest rates at 5.25%, attributing sustained price pressures to the ongoing shipping crisis in the Red Sea. The rerouting of major shipping companies' cargo vessels to South Africa has led to increased shipping costs, which are expected to impact consumer prices. Eurozone CPI data released today indicated a softer-than-anticipated easing in inflation, with the headline figure at 2.8% and the core figure at 3.3%.
Further macroeconomic robustness dampened base metals' sentiment today. As interest rates have now been confirmed to remain higher for longer, commodities felt the brunt of this decision. Still, today's softness has been marginal, bringing prices in line with their longer-term averages. This underscores the prevalence of the mean-reverting strategy being acted out in the base metals space despite the macro noise. Aluminium gave up gains made this week, falling back to test the $2,251/t level. Copper struggled above the $8,600/t level, falling back to $8,534.50/t. Nickel remained within the recent range. Lead and zinc weakened, with the latter seeing a stronger downside back to $2,478/t.
Falling Treasury yields pushed gold prices higher, with the yellow metal jumping to $2,059/oz. At the same time, silver performance remained muted as the white metal's price remained mostly unchanged at $23.13/oz. The weakening global economic outlook weighs on the industrial demand for silver, and we expect the metal to underperform gold in the coming months. Oil edged slightly higher today, with WTI and Brent crude at $76.8/bl and $81.39/bl, respectively.
All price data is from 01.02.2024 as of 17:30
