US stocks climbed today as the yields and the dollar weakened, with markets awaiting the move from the Fed later on in the evening, with some betting on a 75bps rate hike. The Fed chief indicated that a 50bps rate hike is to be expected in June and July, given the data coming within expectations. However, both consumer and producer price growth exceeded market expectations in May, pushing investors to bet on a bigger increase. The 10yr US Treasury yield softened to 3.39%, while the 2yr yield tumbled as much as 16bps. The ECB officials are discussing a strategy to stem the looming Italian crisis following the bond sell-off with a pledge of a new tool. Markets are not convinced that the ECB can keep increasing interest rates while also keeping an orderly market in the bloc’s most vulnerable members. On the economic front, US retail sales fell for the first time in 5 months in May, with autos and other big-ticket items taking a hit, suggesting consumers are finally cutting back on their spending. US homebuilder sentiment slid to a 2-year low in June as multi-decade high mortgage rates weakened the demand.
Metals reversed the trend seen in the last couple of days, with all metals rising marginally today. Data from China was better than expected, with industrial production increasing by 0.7% in May, whilst retail sales contracted by 6.7% y/y, vs the expected 7.1%, giving the base metals complex a boost. Nickel rebounded strongly, testing resistance $26,400/t before coming down to close at $25,857/t. Aluminium and copper had much more moderate gains, as the metals fluctuated around to close at $2,592.50/t and $9,230/t, respectively. Lead and zinc closed higher at $2,077/t and $3,643/t, respectively. On the other hand, iron ore futures slumped for the fifth straight day, falling below $130/mt as rising inventories muted the sentiment; the metal closed at $129.43/mt.
According to the IEA, Russia’s oil revenues surged to $20bn in May, up 11% m/m, despite lower export volumes given the rally in energy prices. May shipping volumes grew nearly by 0.5m bl/d since the start of the year in May, thanks to increases of deliveries to Asia. At the same time, Gazprom cut its gas flows to Italy by around 15%. WTI and Brent fell slightly ahead of the Fed meeting, as they now trade at $118/bl and $120/bl. Precious metals gained footing, with gold and silver strengthening into $1,821/oz and $21.48/oz, respectively.
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All price data is from 15.06.2022 as of 17:30