US stocks strengthened for the second day yesterday as investors assessed the Fed’s monetary policy decision and China’s Evergrande crisis. The dollar sold off, and the 10yr US Treasury yield rallied up to 1.3976%. The 10yr gilt picked up to test the May highs of 0.907% after the Bank of England brought up a possibility of a 2021 interest rate hike to help calm inflation, which is now expected to exceed 4% given the recent energy spike. Meanwhile, Chinese authorities signalled reluctance to bail out Evergrande, as they asked the local governments to prepare for the potential downfall of the company, even after they injected more cash into the financial system. From the monetary policy side, Chinese policymakers left the benchmark interest rates unchanged while holding the 1yr loan prime rate at 3.85%, in line with market expectations.
The LME metals were mostly higher on the day, only with copper closing marginally lower. Zinc saw the strongest gains in the second half of the day, closing near the highs of $3,100/t at $3,091/t. Nickel strengthened to test the resistance level at $19,400/t to close lower at $19,351/t. Aluminium fluctuated but closed higher on the day at $2,949.50. Lead was also stronger, as it was supported above $2,110/t, closing at $2,120.50/t. Copper closed lower on the day despite the mid-day spike reaching $9,385/t levels after the Chinese authorities’ reluctance to bail out Evergrande; the metal closed at $9,273.50/t, and the cash to 3-month spread widened out to $10.95/t.
Oil futures edged higher alongside equities driven by a combination of the higher broader market as well as the weaker dollar. The WTI and Brent futures edged up higher to $73.43/bl and $77.23/bl. Precious metals fluctuated, with gold weakened into $1,751.54/oz and silver up to $22.70/oz.
For more in-depth analysis of base and precious metals, please see our Quarterly Metals report.
All price data is from 22.09.2021 as of 17:30
