Risk appetite slowly improving against tense geopolitical backdrop

Wednesday, July 23, 2014

US inflation data released yesterday bolstered the view that the Fed will maintain low interest rates, with headline CPI coming in line with expectations in June at 0.3% m/m, slightly below the 0.4% reading the previous month. The persistently low inflation reading reassured market participants as speculation that the Fed remained unpressured to raise interest rates saw support for both the S&P 500 and DJIA shore up with the S&P 500 posting a fresh record intraday high, despite the tense geopolitical situation. A stronger than expected Richmond Fed manufacturing index which improved 7% in July against expectations of a 5% improvement as well as bullish June existing home sales improved risk appetite.  

Asian benchmark indices extended their rally during overnight trading as flaring violence in the Middle East and unrest between Russia and Ukraine continued to take a backseat for sanguine Asian investors. Japanese indices managed to hold broadly firm around their opening levels while Chinese stocks rallied higher, following an encouraging session on Wall Street.  

Both zinc and aluminium traded on the LME rallied higher yesterday, supported by improving fundamentals as warehouse stocks for both metals continued to decline. Intraday moves in three month aluminium rallied above $2,050/tonne briefly before ending the session at $2,043/tonne as inventory levels dropped for the fifteenth consecutive session yesterday. Zinc stocks dropped to their lowest level since late 2010 yesterday, supporting prices towards a 34-month high with prices adding over 8% throughout July, closing at $2,362/tonne yesterday.

US inflation slips lower in June

CPI CHNG Index US CPI Urban Con 2014 07 23 08 09 53

Existing home sales in the US continue to surge higher

ETSLTOTL Index US Existing Home 2014 07 23 08 11 53

3-M LME zinc prices surge higher after breaking out of previous consolidation

LMZSDS03 Comdty LME ZINC 3 2014 07 23 08 14 27

Almuminum trades above $2,050 on lower warehouse stocks

LMAHDS03 Comdty LME ALUMINUM 3 2014 07 23 08 14 37

Events for today

0930

UK

Jul

BOE minutes

1500

EZ

Jul

Consumer Confidence

1530

US

w/e

EIA Energy Stocks

 

 

Topics: Equities, Aluminium, LME, Zinc
More from: Kash Kamal