US stocks weakened today, continuing from last week’s downward trend, as anticipation builds ahead of the first major central bank rate cut this week. All eyes are on the ECB this Thursday, with expectations set for a hawkish rate cut ahead of the further cut in September. This is the first cutting cycle in decades where European policymakers are not forced to act in the face of a financial emergency, allowing more leeway in timing their cuts. Today’s marginal downside was also brought on by a weaker-than-expected US factory activity, which fell to a 3-month low of 48.7 in May. The measure of new orders fell to the June 2022 low, suggesting the demand across the economy continues to soften. As a result, the dollar fell below the 104.50 level; the 10-year US Treasury yield fell below the 4.5% level.
Base metals started the week on a cautious note, following last week’s weakness. Copper remains key in driving the base metals narrative, and markets now look comfortable above the $10,000/t level, which serves as a solid basis for future price moves. Despite maintaining a moderately bullish outlook for the longer term, we believe a slight correction below this support level could realign the price closer to its fair value. We expect copper will test the $10,000/t level this week. Meanwhile, nickel and zinc experienced a more pronounced bearish trend, falling for three consecutive days to $19,422/t and $2,943/t, respectively. Aluminium held firmly above the $2,500/t level at $2,661.50/t.
Meanwhile, oil futures sold off following the surprise announcement from OPEC to raise production, prompting WTI and Brent to correct to $74/bl and $78/bl. Gold and silver fluctuated in the light of the upcoming ECB meeting, trading at $2,342/oz and $30.52/oz at the time of writing.
All price data is from 03.06.2024 as of 17:30
