Core PCE price index and personal expenditures in December in the United States reduced the market expectations of the Fed's interest rate cut [SMM zinc morning comment]

Last Friday, the annualised core PCE price index of the United States in December recorded 2.9%, which was a new low since March 2021. The monthly rate of personal expenditure recorded 0.7%, which is a new high since September 2023. After the data was released, traders reduced their bets on the Federal Reserve cutting interest rates. Interest rate futures show about an 80% chance of a first rate cut by the Fed in May and a little less than a 50% chance of a first rate cut in March.
LME zinc prices opened at $2583/mt and closed up $1/mt or 0.04% at $2588/mt last Friday evening, with the low-end of $2572.5/mt. The trading volume decreased to 6573 lots, and open interest added 574 lots to 216,000 lots. Last Friday, LME inventories decreased by 1,875 tons to 191,600 tons, a decrease of 0.97%. The U.S. core PCE price index released last Friday night recorded an annual rate of 2.9%, slightly lower than the expected value of 3%, and the monthly rate of personal expenditures recorded 0.7 %, 0.4% higher than the previous value and expected value. The market lowered expectations of the Federal Reserve's interest rate cut, and LME zinc fell slightly. However, as LME inventories continued to decrease, prices remained high.
The most-traded SHFE 2403 zinc contract opened at 21405 yuan/mt overnight and fell to 21355 yuan/mt before rallying to a peak of 21520 yuan/mt. It eventually settled at 21485 yuan/mt, up 55 yuan/mt or 0.26%. Trading volume decreased 49663 to 43029 lots, and open interest decreased by 386 lots to 90396 lots. The refined zinc import window was closed, and domestic social inventories remained low, keeping SHFE zinc strong.