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.
Conditions in the financial markets have begun to settle following the US banking failures. Share prices in Silicon Valley Bank—a bank that focused on companies based in technology—and Signature Bank—largely concentrated in Crypto—veered to their end recently. Global financial stocks tumbled after the collapse of the two aforementioned banks, with the financial sector, according to the S&P 500 sectors, down nearly 10.0% month to date.
Major US equity indices, however, concluded the session upbeat on Tuesday. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq 100 climbed 1.1%, 1.7% and 2.3%, respectively. Unsurprisingly, all 11 S&P 500 sectors fared well on the session, with communication stocks taking the lead at 2.8% and technology stocks trailing at 2.3%.
In other markets, the FX space was relatively quiet, while US rates rallied across the curve, with the benchmark 10-year US Treasury yield rebounding 12.0 basis points to 3.693%. Commodities largely retreated: spot gold (XAU/USD), spot silver (XAG/USD) and oil (WTI) all fared poorly yesterday, erasing 0.5%, 0.5% and 4.2%, respectively, while palladium extended its bullish phase by 2.4%. Finally, BTC/USD spiked to a high of $26,553 in recent trading, though it has since pulled back to sub $25,000.
Tuesday’s headline risk events witnessed US inflation slow to 6.0% in the 12 months to February, broadly in line with expectations. Although this marks the eighth consecutive slowdown in consumer prices, this is still three times higher than the central bank’s inflation target. This, coupled with recent hawkish commentary, implies that rate hikes are still on the table. In fact, according to the CME Group’s FedWatch tool, markets are pricing in an 86% probability of a 25 basis-point hike at the next meeting later this month over a 14% chance of a 50 basis-point increase.
Major Asia Pac equity indices were largely positive in overnight trading. The Nikkei 225 ended flat, South Korea’s KOSPI gained 1.3% and Australia’s ASX 200 added 0.9%.
Early hours also saw the release of China’s industrial production, which grew 2.4% on the year, slightly below the 2.5% expected, while retail sales were up 3.5%, above the 3.3% estimated. This underpinned a strong short-term bid in AUD/USD, elevating the currency pair to highs beyond the $0.67 psychological figure before shortly retreating and engulfing pre-announcement levels. In Europe this morning, however, major equity indexes are lower. The FTSE 100, the DAX, the CAC and the Euro Stoxx 50 are down 0.5%, 0.2%, 0.6% and 0.4%, respectively.
Headline Events for the Session Ahead:
UK Annual Budget Release (2023) at 12:30 pm GMT.
Month-Over-Month US Producer Price Index (PPI) for February at 12:30 pm GMT (Expected: 0.3%; Previous: 0.7%).
Month-Over-Month US Retail Sales for February at 12:30 pm GMT (Expected: -0.3%; Previous: 3.0%).
New York Empire State Manufacturing Index for March at 12:30 pm GMT (Expected: -7.9%; Previous: -5.8%).
Technically this morning, EUR/USD and the US 10-year yield remains toying with the underside of its 200-day simple moving averages at $1.0728 and 3.686%, respectively. Note that these dynamic levels can serve well as support and resistance. We also see BTC/USD closing in on a weekly pattern profit objective at $26,774, derived from a falling wedge formation, between $17,576 and $25,214.
Currency Markets as of 09:20 am GMT:
EUR/USD: $1.0733 FLAT
GBP/USD: $1.2160 FLAT
AUD/USD: $0.6677 FLAT
USD/JPY: ¥134.68 +0.4%
NZD/USD: $0.6218 -0.3%
USD/CAD: C$1.3694 +0.1%
USD/CHF CHF0.9153 +0.2%