Tech stocks edged lower yesterday, causing the S&P 500 and NASDAQ to weaken on the day. However, energy, financials, industrials, and materials were strong, limiting the losses. The dollar has given back some of the previous day’s gains, but the index remains above 96 and trades at 96.25. The U.S. 10yr yield has rallied and pushed towards 1.70 and trades at 1.68%. ISM data today in the U.S. shows that prices paid declined in December to 68.2, down from 79.3, new orders were unchanged at 60.4, with manufacturing at 58.7, down from 60 the previous month.
Metals were stronger yesterday, with copper pushing back towards $6,800 after as risk appetite was stronger, we saw reports that suggested Escondida production was down, with reports suggesting it was the lowest in years. Does this mean that output may weaken in 2022 after sustaining high supply levels during COVID? Too early to tell. Aluminium was firmer and closed at $2,839/t, spread at $9.25 contango. Stocks for the metals remain low, and while we expect Chinese output to improve following the Chinese New Year and the Winter Olympics, there is still a backlog in the supply chain, and the lack of output from Europe will cause European prices to remain elevated. European gas prices are rising and will continue as stocks are lower than usual and cold weather is expected in January and February. Nickel prices continued to rally $21,137/t, and the spread remains backwardated at $123/t. Lead was softer, closing at $2,298/t, while zinc gained ground at $3,604/t, with the cash to 3month spread at $51.75/t.
Energy prices were gained ground today, with Brent trading at $80.08/bl with WTI at $77.17/bl; OPEC+ have indicated that they will increase output by 400,000 a day from February, as tightness in the market is expected to be tighter than previously thought. Precious metals were stronger today, with gold pushing towards $1,815/oz and silver trading at $23.05/oz.