The FP Markets research team produce First Light News during the early hours of the European session, ensuring traders and investors have the news needed to begin their day.

Good morning.

Led by declines in materials (-2.2%) and technology (-2.1%), as well as steep losses in consumer discretionary and energy, in addition to the First Republic Bank (FRC) reigniting banking fears, US equities tumbled on Tuesday.

In another hit to the banking sector, First Republic Bank took a major blow, watching its share price plummet to another record low, down an eye-popping 50% on the back of more than $100bn of withdrawals. The S&P 500 wrapped up the day down 65 points (-1.6%) to 4,071. In other markets, the Dow fell 344 points (-1.0%) to 33,530, the Nasdaq 100 slid 244 points (-1.9%) to 12,725, and the Russell 2000 scaled lower by 43 points (-2.4%) to 1,745.

Consumer confidence in the US also dipped to a nine-month low in April. According to the US Conference Board, the US consumer confidence index fell to 101.3 in April (vs 104.1 expected). However, the number of new home sales rose 9.6% to an annualised rate of 683,000 units in March (vs 633,000 units expected).

Not a pleasant chart for the First Republic Bank:

(Trading View)

Overnight, Aussie inflation cooled in Q1 (2023) compared to the previous quarter but still came in nearer the upper end of the forecast range (7.1%). According to the Australian Bureau of Statistics, Q1 headline CPI inflation was reported at 7.0% versus 7.8% recorded in Q4 (2022). The initial reaction observed an indecisive stance on the AUD/USD, though the currency pair is currently down against all G10 peers and losing ground against its US counterpart by around 0.3%. Market pricing for the next week’s RBA (Reserve Bank of Australia) meeting calls for another hold on monetary policy. In fact, as of writing, there is a 93% probability of the central bank holding the Official Cash Rate unchanged at 3.6%. However, in saying this, some desks still feel a 25 basis-point push could be on the table.

Asia Pac equity markets finished the session mixed. Japan’s Nikkei 225 fell 204 points (-0.7%) to 28,416, and Australia’s ASX 200 lost 6 points (-0.1%) to 7,316. Major European equity benchmarks open lower this morning. The FTSE 100, the DAX 40, the CAC 40 and EU50 are down -0.1%, -0.3%, -0.5% and -0.5%, respectively.

Regarding US Treasuries, yields bull steepened on Tuesday, weighed by recent banking fears and disappointing US economic data. Longer duration bonds saw the US 10-year Treasury bond yield sink 11.7 basis points to 3.398%, while the yield on the 30-year Treasury bond was down nearly 8 basis points to 3.652%.

In the FX space, AUD/USD was a notable underperformer on Tuesday, erasing 1.0%, closely followed by the EUR/USD and GBP/USD, down 0.7%, respectively. As of writing, things are relatively calm. As noted, though, the AUD/USD is down across the board, though EUR/USD and GBP/USD are higher by around 0.3% a piece.

Potential Head and Shoulders Top pattern brewing on the daily timeframe of GBP/USD?

(Trading View)

Regarding commodities this morning, spot gold (XAU/USD) continues to gnaw at the underside of $2,000 after finding some local support around $1,972. Spot silver (XAG/USD) is seen rebounding from its 20-day simple moving average at $24.90, and the price of WTI oil is higher by nearly 1.0%, following a 2.0% drop on Tuesday.

Finally, we are pretty much quiet in the crypto domain as of writing, following a 3.0% rally in BTC/USD yesterday. Of note in the crypto space, Standard Chartered recently came out and said that Bitcoin has the potential to reach $100,000 by the end of 2024.

Headline Events for the Day Ahead:

Month-Over-Month US Durable Goods Orders for March at 1:30 pm GMT+1 (Expected: 0.7%; Previous: -1.0%).

Major Currency Markets as of around 8:20 am GMT+1:

(Trading View)

Thanks for reading. Have a great day!

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