Markets traded a day of two halves today with gains across the board this morning due to solid tech earnings boosting sentiment and Nancy Pelosi leaving Taiwan; however, this afternoon, commodities markets reversed gains and treasuries the following comment from the Fed. Global equities are still optimistic as sentiment was more robust, but the US 10yr yield rallied to 2.8%. The USD index edged higher as the USD made gains against most G10 currencies, with USDJPY back above 134 and USDCHF at 0.9636. Liquidity across all markets remains thin during the summer months, and moves are slightly exaggerated. Data in the US saw services and composite PMIs contract again, but factory orders continue to grow steadily. Germany's exports improved M/M to 4.5% from -0.5% as the trade balance reached 6.4bn.
Metals prices declined as hawkish comments from the Fed, and the expectation of higher US-China tensions prompted prices to soften. Zinc prices failed above $3,330/t, driving prices to close at $3,277/t; the cash to 3-month spread still trades at $112/t back. Lead prices closed at $2,025/t after testing $2,054.5/t, and tin prices traded in a narrow range today, closing at $24,245/t, after posting a low for the day at $23,805/t, the spread tightened marginally into $210/t, Taiwan is a dominant force in the semiconductor and chip sector, and increasing tensions will prompt volatility in an already thin market. Copper failed to hold onto today’s highs above $7,800/t, and prices closed at $7,677.5/t after hawkish comments from the Fed weighed on sentiment. Nickel was softer as well, closing at $22,332/t.
Energy prices buckled after OPEC decided to increase output marginally, but also USS crude inventories rose, Brent trades at $97.51/t, and WTI trades at $91.39/t. The additional production of 100,000 barrels daily in September will slightly ease market tightness. However, investors are looking at slower growth and suggesting demand will wane.
All price data is from 03.08.2022 as of 17:00