US stocks tumbled as the global recessionary fears resurfaced after the Fed-driven rally fizzled out. The US central bank hiked interest rates by 75bps yesterday, the sharpest move since 1994 and held a possibility of another high interest rate hike next month, given economic data. The policymakers, however, expect inflation to peak and begin to moderate right about now. The US Treasury yields continued their increase, but resistance at 3.50% caused it to settle at 3.32%. Disappointing economic data also weighed on sentiment later on in the day, with mortgage rates surging past 1987 highs of 5.78%, further increasing pressure on homebuyers and the market in general. At the same time, new home constructions in the US dropped by 14.4% y/y in May, the lowest in more than a year, highlighting the trend of diminishing demand. Elsewhere, European bond yields fell as the franc shot up higher following a surprise rate hike from Switzerland. Likewise, BOE hiked interest rates by 25bps today and has said it is prepared to unleash bigger moves if necessary.
Metals across the board declined today, with only lead closing higher, as higher interest rates elevate global recession worries. Aluminium saw the biggest decline, as it fell below the support of $2,560/t to close at $2,504.50/t, the lows not seen since July last year. Australia is currently facing power shortages, with 8m people have been told to turn off their lights if they have a choice. The question of whether aluminium smelters are able to perform will strongly depend on their power supply structure. The country’s biggest aluminium smelter Tomago Aluminal’s power supply, is said to be little impacted by the outage, given their long-term contact agreements. However, rising energy prices are already seeing trickling down to electricity prices and are likely to bring the input costs for smelters higher. Copper edged higher in the first half of the day before weakening to $9,074.50/t. Nickel and zinc closed lower at $25,259/t and $3,577.50/t, respectively. Only lead closed higher at $2,101/t.
Oil futures fluctuated strongly today following the Fed decision. WTI and Brent are trading around $115/bl and $118/bl, respectively. Precious metals shrugged off the Fed decision later on in the day as markets flocked to the metals as safe havens; gold and silver increased marginally day on day to $1,845/oz and $21.80/oz, respectively.
For more in-depth analysis of base and precious metals, our Q2 2022 Quarterly Metals report is out now!
All price data is from 16.06.2022 as of 17:30
