daily metals

This MorningBase metals started the day slightly positive. All metals are trading higher than last night. Lead is up the most with a plus of almost one percent.What’s Moving Markets?Ahead of the key decision on rates, stocks struggled for direction as a watchful tone spread across global markets. Markets were subdued as they look ahead to the FOMC meeting. Investors will also look for cues on future decisions from the FOMC’s Summary of Economic Projections, set to give insights on the committee’s balance of evidence of a slowing job market against lingering concerns that there might be some stubbornness in inflation above the 2% level. On the data front, both housing starts and building permits topped forecasts. Oil gained amid renewed tensions in the Middle East Yields on 10-year US Treasuries rose 3bp to 3.69%, while the USD index was steady at 100.9.Fed Cuts Rates for 1st Time in 4 Years. The Fed cut the fed funds rate by a jumbo 50bp to 4.75%-5% during its Sep 2024 meeting, the first reduction in borrowing costs since Mar 2020. While the decision to cut rates was anticipated, there was speculation about whether the central bank would choose a more conservative 25bp reduction instead. Additionally, projections by FOMC members pointed to a median of 100bp in total rate cuts for the year, translating to 25bp in each of the central bank's meetings this year. Policymakers noted that recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have slowed, and the unemployment rate has moved up but remains low. Inflation has made further progress toward the Committee's 2% objective but remains somewhat elevated. In considering additional adjustments to the target range for the federal funds rate, the central bank will continue to carefully assess incoming data, the evolving outlook, and the balance of risks.The US is heading for a soft landing, as the economy expands while inflation drifts back to the Fed’s 2% target, according to projections from economists polled by the Financial Times. GDP growth will be 2.3% in 2024 and 2% in 2025, according to the median estimates by the economists polled in the FT-Chicago Booth survey. Unemployment will rise to 4.5% by the end of this year, slightly above the current rate of 4.2% but still historically low, while the core personal expenditures index — the Fed’s preferred inflation gauge — will fall to 2.2% from 2.6% in Jul, the economists predicted. The survey findings suggest the US economy is heading towards the central bank’s optimal outcome after a period of high borrowing costs: solid growth, low inflation and healthy employment. Asked whose economic platform would be more inflationary, 70% of the economists picked Trump’s. The same proportion thought his plan would lead to larger deficits. Less than a third thought there would be no material difference in terms of inflation, while roughly a fifth said the same regarding the deficit.Base metals lacked direction as market participants refrained from taking risk positions ahead of the FOMC decision. The prospect of metals demand being stimulated by a Fed rate cut helped boost sentiment. The market is also on edge as it awaits a response from Beijing following another month of poor economic data. Speculation remains rife that officials will announce further support measures once the country returns to work following the Mid-Autumn Festival. Aluminium was supported by supply disruptions in the alumina market. A water storage pond at an alumina refinery in India collapsed, potentially removing more supply of the crucial raw material.Iron ore remained under pressure. China’s crude steel production dropped 6.1% in Aug to 77.92Mt, marking the third consecutive monthly decline, driven by weak prices and sluggish demand from the property and manufacturing sectors. Although robust steel exports provided temporary relief, output is expected to rebound in Sep as margins improve. However, uncertainty surrounding China's 2024 steel output cap continues to weigh on sentiment. Supply is rising, with Port Hedland exports hitting 47.83Mt in Aug, up from 43.16Mt in Jul.Precious metals were rangebound ahead of the FOMC decision, while palladium gave back recent gains on profit-taking. Gold was underpinned by some safe haven buying as tensions in the Middle East ratcheted up following the attack in Lebanon.