US stocks opened lower today after the Consumer Price Index (CPI) release indicated a less-than-expected softening in inflation. The headline CPI for January eased to 3.1% YoY, down from 3.4% YoY the previous month, while core inflation held steady at 3.9% YoY. Despite a decrease in core goods prices, a rise in core services prices resulted in a flat overall reading. Inflation continues to moderate, albeit gradually, supporting the Federal Reserve's approach and leading markets to believe the central bank is unlikely to initiate monetary easing prematurely. As a result, market participants continue to push back the timeline for anticipated interest rate reductions, with only one cut expected by June. We believe inflation will remain sticky and bringing it back down to the 2% target level might not materialise until the last months of 2024. Following the CPI data, the dollar index rose to 104.73, and the 10-year US Treasury yield surged, nearing the 4.8% mark. In the UK, the International Labour Organization's unemployment rate for December showed a slight decline to 3.8% YoY from 3.9% YoY the previous month, indicating a small drop in the proportion of people actively seeking employment.
Base metals' trajectory remained broadly unchanged from this morning despite the US dollar's strengthening due to higher-than-anticipated CPI. This suggests that the metals market is currently following a mean reversion strategy, and we may see further gains in the near future. However, macro-sensitive metals, such as aluminium and copper, have faced downward pressure due to the appreciation of the dollar, leading them to close at $2,225.50/t and $8,260/t, respectively. Nickel has rebounded above $16,000/t after it bounced back from prices below the robust $15,850/t level. Meanwhile, lead has continued to soften at $2,005/t, while zinc remains supported above the $2,300/t level at $2,314.50/t.
The increase in US Treasury yields caused non-yielding assets to fall sharply today. Gold, which had reached $2030/oz at the day's start, dropped to $1992/oz following the CPI announcement, while silver fell to $22.1/oz. Oil prices remained relatively stable, with WTI and Brent Crude slightly up at $77.2/bl and $82.2/bl, respectively.
All price data is from 13.02.2024 as of 17:30
