A strong week for global markets as traders ramp up bets of a Fed cut, and Trump and Putin meet in Alaska…
The MSCI All Country World Index rose 0.2% to an all-time high on Wednesday, tracking Wall Street’s surge to fresh peaks. FTSE 100 reaches new highs, and Crypto markets rally as Ethereum tests records, reflecting global optimism.
Ukraine war
Trump and Putin meet Friday for the first time since Trumps inauguration in January, and markets seem optimistic, yet remain tentatively cautious: apparent solutions laid out on the table involve ceding territory – more specifically the Donbas region – but this is not currently acceptable to Ukraine. However, Trump believes this is paramount in order to make a deal to end the war. Trump has continued to threaten economic consequences if Putin doesn’t come to compromise.
Any further developments or de-escalation of the war in Ukraine will provide a good boost to market sentiment.
US inflation & rate cuts
On Tuesday, US CPI figures were released and showed inflation is not rampant in the US, despite many predicted forecasts suggesting this would be a knock-on effect of current tariff policies. While CPI did rise (Core Inflation returning to Feb25 levels), it is not at an alarming rate – for reference, global inflation average is 4.5%; Trump and his administration piled on more pressure for the Fed to reduce rates and markets (should this be slumped ? or piled on ?check with sol) lumped on bets accordingly; there had been growing whispers of a 0.5 cut, but this has been swiftly dispelled.
However, there was a caveat… With recent data mostly favouring the President in his bid for lower rates, US PPI on Thursday threw a spanner in the works – Producer prices came in higher than estimates on all accounts quite significantly. Notably, Producer prices and Core PPI both came in 0.8% higher than estimates YoY. Following this, traders pared Fed rate cut bets.
A Fed cut is inevitable this year, it just depends on the size/frequency/timing of said cut/s – the more cuts this year, the weaker the Dollar will be and in turn, the stronger base metals will perform.
Chinese data
Chinese data on Friday showed a slowing economy with factory activity and retail sales disappointing:
- Chinese new Yuan loans contracted for the first time in 20 years, highlighting subdued willingness for borrowing and spending.
- Production at Chinese factories and mines rose at the slowest rate since November and expanded 5.7% last month from a year earlier
- Retail sales grew 3.7% on year in July, the least this year, down from 4.8% in the previous month.
- Expansion in fixed-asset investment in the first seven months of the year decelerated to 1.6%, as a contraction in the real estate sector deepened
- The surveyed urban unemployment rate worsened more than expected to 5.2%.
The Chinese economy had looked resilient against Trump tariffs, but cracks are now beginning to form – although uncertainty abounds over the outlook for global trade, industrial activity and construction also suffered from extreme weather, so we may see a rebound in the following month.
On the surface, weak industrial data from China, the world’s largest consumer of metal, would seem bearish, however, is the market seeing this as a good thing? In the past, China have ramped up economic stimulus on signs of a wavering economy. This week has shown the economy is under pressure. If data continues to show declines, it may be a signal for them to inject more stimulus or push for a deal with the US – both of which will be positive for base metals.
Keep an eye on future Chinese data releases to see if this was an anomaly – due to extreme weather – or a direct impact of Trump policies.
Technical Analysis
Copper continues to meet resistance at 9800 but finds support on the 50dma average below. A break-through 9800 and we would look to test the downtrend from the high on 29/5/24. A break higher and 10k would be the next target.
Ali has been testing 2620 all week, trading higher each day but never securing a 5pm close above. Any break higher and we would look to psychological levels of 2650 and 2700 for next areas of resistance.