US stocks rebounded yesterday after a five-day slide as Powell reassured the markets that the Fed would combat inflationary pressures if needed. The Fed said it would not hesitate to combat rising prices, although supply and demand imbalance is expected to abate. This pushed the 10yr US Treasury yield higher later in the day but struggled to shake off earlier losses as the dollar sold off. China’s economic growth for 2022 is now being downgraded amidst the rise of COVID-19 cases and the country’s zero-covid approach, meaning major economic regions are being closed down rapidly. The government vowed to stabilise supply chain pressures, with the State Council asking the financial institutions to increase credit to support firms.
Risk appetite returned yesterday, with metals gaining ground. SHFE and LME metals are all higher at the time of writing. Nickel gapped higher overnight as the LME outage, in conjunction with an open arb window, and low liquidity likely caused some traders to be stopped out, the 3-month futures traded at $21,765/t before closing higher at $21,794/t. Copper has traded back above, $9,700/t to close at $9,719.50/t. Zinc continued to gain ground and closed at $3,556/t, with the spread at $20.40/t. Iron ore prices tested $130/t, and steel prices have also gained as investors are starting to believe stronger stimulus from China.
European electricity prices continued to decline, plunging today in the light of easing energy crunch as the weather remains warm. Oil futures rallied closer to day-end despite the news that Libya will restart oil exports. WTI and Brent now trade at $81.23/bl and $83.59/bl. Likewise, precious metals spiked after the Fed statement, with gold and silver jumping to $1,816.10/oz and $22.67/oz, respectively.
For more in-depth analysis of base and precious metals, please see our Quarterly Metals report.
All price data is from 11.01.2022 as of 17:30