US stocks opened on the back foot, following better-than-expected economic data. More importantly, the Fed’s announcement to continue to keep the rates higher for longer has helped to price out interest rate cuts further down the curve. At the time of writing, the probability for March and May cuts stands at 16% and 58%, respectively, with a greater possibility for a June start. This prompted a strong correction in the bond market, pushing the 10-year yield to 4.16% and the 2-year yield to the highest levels in 2024. The dollar is now trading at 104.50. From the macroeconomic perspective, the US sector expanded by the most in four months in January, highlighting the continued robustness of the economy to take the hit of higher rates.
China also experienced economic expansion in the services sector, but the country's decision to reduce its dependence on foreign investment has caused a decline in the performance of base metals. In addition, the rally in the dollar also affected prices. As a result, aluminium fell to $2,212.50/t, and copper dropped below the $8,400/t level to close at $8359.50/t. Nickel also fell below $16,000/t, but the lack of appetite to break below the robust support at $15,895/t indicates that there will likely be rangebound moves in the near term. Zinc and tin were more profoundly affected, breaching robust support levels to close at $2,420/t and $24,836/t, respectively. The CPI is expected to underperform again in January, which could negatively impact market performance on the day of the release (8th February).
Oil futures softened slightly today, with WTI and Brent edging lower to $72/bl and $77/bl. Gold and silver felt the brunt of higher Treasury yields, falling to $2,020/oz and $22.27/oz, respectively.
All price data is from 05.02.2024 as of 17:30