Steel Price fades recovery as China PMIs jostle with recession woes

Steel Price struggle to extend the weekly gains, bracing for the quarterly loss, as fears of recession join supply woes during Thursday’s Asian session. Even so, industrial metal manages to react to the firmer activity numbers from China.

That said, construction steel rebar on the Shanghai Futures Exchange (SFE) edged up 0.1% around 4,370 yuan per metric tonne, while hot-rolled coil decline 0.1% by the press time. Further, Stainless steel rose 0.8% intraday but stays pressured of late.

Talking about China data, the preliminary readings of official PMIs for May came in better than previous readings. That said, the headline NBS Manufacturing PMI rose to 50.2 versus 49.6 prior, versus 50.4 forecasts. Further, Non-Manufacturing PMI rallied to 54.7 versus 52.5 expected and 47.8 in previous readings.

However, the major central bankers’ readiness to battle inflation, even at the cost of short-term economic slowdown, recently exerts downside pressure on the market sentiment.

Among them, Fed Chairman Jerome Powell repeated his latest pledge to battle inflation with readiness to announce another 0.75% rate hike if needed. The Fed Boss also praised the US economic strength and helped the US dollar to remain firmer. It’s worth noting that Powell’s comments suggesting challenges for US jobs data during the battle with inflation appears to have weighed on the risk profile of late.

While portraying the mood, the US 10-year Treasury yields snap a two-day downtrend as the key bond coupons rebound from the weekly low to 3.10%, up one basis point (bp). The same seems to probe the US dollar buyers as the US Dollar Index (DXY) retreats from a two-week high to 105.00. Further, the S&P 500 Futures drop 0.30% intraday to 3,810 at the latest.

Elsewhere, increasing steel production in Asia and the recent increase in the output appears to have exerted additional downside pressure on Steel Price.

Moving on, the metal prices are likely to remain pressured with today’s US the Core Personal Consumption Expenditure (PCE) Price Index, expected 0.4% MoM versus 0.3% prior, being an important catalyst to watch for short-term directions. Should the Fed’s preferred inflation index remain firmer, the odds of witnessing aggressive rate hikes can’t be ruled out, which in turn appears negative for commodities. Additionally, the higher rates also negatively affect the growth and demand for the industrial metal, offering a double-barrel attack on the metal if today’s US data came in firmer.