Aluminium market update

Macroeconomic environment At the BRICS summit in Johannesburg, China President Xi called for trade wars to be rejected as there will be “no winner” from them. Meanwhile, yesterday evening the US and the EU declared a freeze of the trade war and a hold on auto tariffs. In the most important date to come out yesterday, US New home sales fell in June to the slowest pace in eight months. The actual figure was at 631k versus a survey of 668k which is adding to sign that the housing market is cooling. Equities Equity market indices consolidated while awaiting the ECB and the Trump-Juncker meeting. More specifically, the defensive sectors outperformed (with retail and food in the lead) while auto and insurance brought up the rear. The V2X stabilised at 13.5%. Bond markets / Derivatives On Wednesday, 10-year and 30-year T-Note yields fell by around 1bp and 2bp, respectively. The 2-year T Note, however, gained 2bp to 2.65%, the highest level since 2007, leading to a 3bp flattening of the 10Y-2Y segment of the curve. Money markets / Central banks The spread between the US 3-month Libor rate and the OIS continued to decline throughout the trading session, accompanied by the 3-month Ted spread that fell to 34bp. The 5-year Eonia and Euribor 3s6s bases also fell Wednesday. The SOFR rate gained 3bp and reached 1.90%. The Euribor Dec. 18 contract fell during the trading session, contrary to the Euribor Dec. 19 contract, which rose slightly. FX The dollar initially stabilised thanks to an easing of trade tensions (Trump-Juncker meeting), and the EUR/USD was around 1.17. Emerging currencies appreciated sharply, e.g. the TRY which jumped 1.3%. Fresh rumours about trade tensions (introduction of trade barriers on cars) then benefited the dollar and the yen (USD/JPY below the 111 level). Commodities Copper prices continued rising. This came after Freeport announced that global protectionism hasn’t hut demand for copper yet but that it would be willing to adjust production if the situation changes.