U.S. inflation surprised to the upside, reaching 7.5% Y/Y, with core inflation at 6%. The month on month growth was 0.6%. The most significant price increases came from used cars at 40%. As indicated yesterday, stocks sold off, and yields rallied, breaking above 2%, but U.S. equities have now stabilised. Average hourly and weekly earnings have declined by 1.7% and 3.1%, respectively. The dollar has sold as it did in previous high readings, but cable has surged higher, breached 1.36 and trades at 1.3641. The high inflation reading has forced the Fed’s hand, and we look at language in the lead up to the March meeting from Fed officials about a 50bp hike. EURUSD has firmed, breaking towards 1.15.
Metals prices were bid once again, but aluminium consolidated recent gains after the large inflow into LME warehouses. We expect aluminium prices to remain on-trend with physical prices high, especially in Europe. Zinc prices rallied towards $3,750/t and closed at $3,703/t; lead tested appetite at $2,282.5/t with the cash to 3-month spread at $11.65/t. Copper has been bid but failed above $10,250/t. China easing monetary conditions into the already tight market indicates a tighter market. We expect copper to remain firm in the near term; the cash to 3 month spread rallied to $50/t (last). Tin and nickel were well bid once again, with Tin breaking above $44,000/t and nickel at $23,465/t at writing. Iron ore and steel have continued to rally, with SGX iron ore at $155.95/t.
Energy continues to rally after yesterday’s stock data; OPEC has indicated that demand could surprise the upside due to the economic recovery. Brent and WTI are at $92.92/bl and $91.46/bl at the time of writing. Gold and silver prices, $1,840/oz with silver at $23.67/oz.
All price data is from 10.02.2022 as of 17:30
