US stocks dipped at the open today after nearing record highs. Fears of a recession that rattled the market two weeks ago have completely dissipated, and investors are now preparing for the first Fed interest rate cut in September. Forward swaps are currently pricing in a 30% chance of a 50bps cut, but we expect the Fed to proceed with a more measured 25bps cut. A 25bps cut would allow the Fed to better assess the economic impact and adjust its strategy as needed, reducing the risk of overreacting to the latest data. The dollar continued its downtrend today, slipping to 101.5, while the 10-year US Treasury yield dropped to 3.82%.
A mixed day across the base metals group today. Aluminium continued to strengthen, gaining another $50/t to test the $2,500/t resistance level. The cash to 3-month spread has risen rapidly, up to -$30.99/t, the highest level since April, suggesting growing tightness on the LME. Nickel also edged higher, breaking above the robust resistance of $17,000/t to trade at $17,030/t. Lead and zinc followed suit. Copper, on the other hand, stalled above the $9,250/t level, edging back to $9,243/t.
Gold reached record highs once again as its appeal as a non-yielding asset increases amid declining Treasury yields, with the yellow metal trading at $2,515/oz. Silver tested the $30/oz level but struggled to maintain it, standing at $29.5/oz at the time of writing. Oil prices also fell, with WTI and Brent crude trading at $73.9/bbl and $77.2/bbl, respectively.
All price data is from 20.08.2024 as of 17:30
