US stocks opened higher today, boosted by a significant decline in 10-year US Treasury yields following data indicating some softening in the labour market. The ADP Employment Change, which estimates monthly changes in non-farm private employment based on payroll data, came in lower than expected for June, showing 150k new jobs added compared to the expected 165k. Additionally, last week's jobless claims were higher than anticipated, with initial claims reaching 238k—the highest level since January. The data was interpreted as a sign of weakness in the labour market, leading investors to increase their expectations for the first Fed interest rate cut in September. Forward swaps are now pricing in more than an 80% chance of a 25bps rate cut at the start of Q4. The dollar index plunged, trading at 105.1, while the 10-year US Treasury yield dropped to 4.34%.
Stronger gains were seen across the base metals complex today. While the upbeat mood drove this morning's upside, a weaker dollar further supported the appetite for higher prices later in the day. We believe the dollar was oversold today, possibly exaggerating the market response to weaker US economic readings. We expect the currency to increase slightly in the near term, reaching above 105.40. For the rest of the week, a greater focus will be paid to performance outside the US, particularly in the UK and France. As a result, if the positive sentiment among base metals continues tomorrow, we expect only a marginal price increase. As a result, copper strengthened to $9868/t, as aluminium tested the resistance at $2 550/t. The rest of the complex followed suit: lead and zinc edged higher, as nickel defended the $17,000/t level.
As the dollar and Treasury yields declined, precious metals appreciated today. Gold surpassed the 50-day moving average, trading at $2,364/oz, while silver jumped above $30/oz, reaching $30.6/oz. Oil softened slightly, with WTI and Brent crude at $82.5/bbl and $86.0/bbl, respectively.
All price data is from 03.07.2024 as of 17:30