The US stock market started positively in the morning, continuing this week’s upward trend. However, momentum slowed later in the day after the release of the US CPI, which showed that inflation softness was not as robust as the market had expected. In particular, US CPI grew by 2.4% YoY, coming in 0.1pp higher than anticipated for the month of September. Food and shelter continue to contribute to inflation stickiness. Meanwhile, the initial jobless claims came in higher than expected at 258,000, marking the highest level since last summer. The mixed economic picture prompted the 10-year US Treasury yield to rise to 4.08% and the dollar to fluctuate around the 102.90 level. In turn, forward swaps solidified market conviction for a 25bps cut in November. We anticipate a slow and steady approach from the Fed going into next year, with 25bps cuts in November and December meetings, as a strong economic performance coupled with decreasing inflation pressures may weaken policymakers' resolve for aggressive interest rate cuts.
Base metals performance was disconnected from macroeconomic news, with prices holding firmly near the previous day's lows on the open. Markets have now digested the China stimulus story and will likely shift their focus back to economic indicators to gauge the path forward. With economic performance remaining muted, we expect base metals prices to reflect this by softening slightly in the coming days. Copper might edge slightly below the $9,600/t level as aluminium dips below $2,500/t. We do not expect much downside beyond these levels in the near term. In the meantime, prices held firmly today; aluminium and copper remained above the aforementioned support levels at $2,586/t and $9,723/t, respectively. Nickel hesitated below the $17,500/t level.
Oil futures continued to pare gains as tensions in the Middle East added to supply worries, prompting WTI and Brent to remain above the $70/bbl level. Despite a stronger-than-expected inflation growth, gold and silver benefitted from some risk-off appetite, gaining ground to $2,623/oz and $30.86/oz, respectively.
All price data is from 10.10.2024 as of 17:30