EUROPEAN COMMODITIES UPDATE: Crude retraces initial upside with the focus on Chinese PMIs

Analysis details (10:55)

• Crude benchmarks have come under modest pressure as the European morning progresses, with the benchmarks currently lower by circa. USD -0.70/bbl having more than retracted a concerted bid that occurred around the European cash equity open, with WTI Feb'23 peaking at USD 81.50/bbl and Brent Mar'23 at USD 87.00/bbl. A move that occurred without a clear fresh fundamental driver at the time.


• More broadly, the session has been dominated by Chinese data and USD action. Firstly, the Chinese PMI was softer than expected for the official NBS Manufacturing print, with the metric being assessed as the first reading into the Chinese economy since it began re-opening from COVID controls. On this, Credit Suisse expects a spike in COVID infections to occur around the Chinese New Year (January 21st-27th) given the expected mass migration, which will likely weigh on activity in Q1. Though the faster reopening pace seen thus far is an upward risk to the region's growth forecast of 4.5% via Credit Suisse. China aside, the USD has been one of the main movers as the index eclipsed multiple late-December peaks in short order and peaked (thus far) after a flurry of ‘soft’ German state CPIs ahead of the mainland figure.


• Elsewhere, spot gold and silver are firmer despite the mentioned USD strength with Chinese data points perhaps proving favourable for the traditional haven. Albeit, the yellow metal has retreated from a USD 1850/oz peak by around USD 15/oz; nonetheless, the metal remains comfortably above its 10-DMA at USD 1811/oz. Base metals are supported despite the China metrics as the overall tone remains constructive amid a relatively thin docket to start a particularly busy week, currently LME Copper has managed to incrementally reclaim the USD 8400 mark.

03 Jan 2023 - 10:50- Research Sheet- Source: Newsquawk