North American News
US major indices close with mixed results and volatile up-and-down trading session
- Dow Industrial Average and S&P move lower. NASDAQ index up modestly
The major US stock indices are ending the day with mixed results:
- Dow Industrial Average fell -90.61 points or -0.28% at 31819.04
- S&P index fell -5.87 points or -0.15% at 3855.73
- NASDAQ index rose 49.97 points or 0.45% at 11188.85
- Russell 2000 fell -28.40 points or -1.60% at 1744.30
The lows and highs for the major indices today
- Dow Industrial Average was down -268.52 points at its lows and up 330.74 at highs
- S&P index was down -52.4 points at the lows, and up 43.45 points at highs
- NASDAQ index was down -156.08 points at the lows, and up 187.84 points at highs
In the US debt market today, the shorter and rallied the most with the two year yield falling below 4.0%. The 30 year bond was down only modestly:
- 2 year yield fell -63.33 basis points to 3.96%
- 5 year yield fell -31.2 basis points to 3.658%
- 10 year yield fell -16.9 basis points to 3.534%
- 30 year yield fell -2.0 basis points to 3.68%
Banking Stocks Tumble
A bank run ends when it ends. The US saying that bank deposits were guaranteed would be enough to stop the run but you also can’t blame anyone for wanting to move money into something safer, like bonds or bigger banks.
NY Fed: Year-ahead inflation expectations fall to the lowest since May 2021
- Inflation expectations under control
- One-year inflation expectations 4.2% vs 5.5% prior
- Three-year inflation 2.7% vs 2.7% prior
- Five-year inflation 2.6% vs 2.5% prior
- Expected home price appreciation 1.4% vs 1.1% prior
- Household views on financial situation improved in Feb
Fed Chair Powell says SVB failure demands a ‘thorough, transparent and swift’ review
Comment comes as the Federal Reserve announces a review of the whole debacle at SVB. The results will be published on May 1.
Commodities
Gold surges to $1,913 amid increasing market volatility and risk
- The XAU/USD (Gold) commodity starts the week positively, trading at $1,906.70, up by 2.11% on the day.
- Increased market volatility and rising risk led to a surge in demand for safe-haven assets like Gold.
- Technical indicators, such as the daily 20-SMA and 50-SMA, suggest a potential bullish outlook for gold.
- Due to risk aversion, US yields have reached their lowest levels in recent months.
Daily price movements:
XAU/USD (Gold) commodity opens the first day of the week at $1,867.24, with an intraday high of $1,913.13 and a low of $1,867.24. Gold trades at $1,906.70 at the press time for the first time since February 3rd, 2023, up by 2.11% on Monday.
The sharp drop in US yields is considered the primary catalyst for the rise in the price of Gold. The US 10-year yield has fallen to 3.41%, approaching its year-to-date lows from its previous level above 4.0%. Meanwhile, the 2-year yield reached its highest since 2008 and fell to its lowest intraday level since October 2022, at 4.00%.
Following the collapse of Silicon Valley Bank (SVB), concerns have arisen about the state of the banking sector, which has caused a decrease in expectations for a rate hike by the Federal Reserve (Fed). Investors are watching the potential impact of this crisis on economic data.
Silver faces the 200-DMA at around $21.70s
- XAG/USD advances as US Treasury bond yields undermine the US Dollar.
- The XAG/USD is testing the confluence of the 50/100/200-day EMAs.
- XAG/USD Price Analysis: To remain upwards in the short term, though the rally’s size suggests a mean reversion correction.
XAG/USD surges sharply in Monday’s session, up by more than 6% on investors flying to safety. US Treasury bond yields collapsed due to regional bank failure in the United States (US) blamed on higher rates. Therefore, US bond yields collapsing are a tailwind for the white metal prices. At the time of writing, the XAG/USD is trading at $21.76.
XAG/USD Price Action
The white metal is testing solid resistance in the confluence of the 200, 50, and 100-day Exponential Moving Averages (EMAs), each at $21.79, $21.85, and $21.87, respectively. In addition, the Relative Strength Index (RSI) broke above the 50 neutral lines, portraying buying pressure strength. The Rate of Change (RoC) suggests buyers moved aggressively, which could open the door for a mean reversion move. Therefore, traders should be careful.
With XAG/USD breaking above the 200-day EMA would pave the way toward $22.00 a troy ounce. Once done, the XAG/USD next resistance would be $23.00 before testing the February 23 high at $23.59.
In an alternate scenario, the XAG/USD first support would be the 20-day EMA at $21.16. A breach of the latter will expose the $21.00 figure, followed by the March 13 low of $20.50, before falling to YTD lows at $19.92.
US shale oil production in April seen up 69,000 barrels per day – EIA
- New EIA forecasts
Oil is having a tough day today as the crude market frets about slower global growth due to a banking crisis. WTI crude is down $2.00 to $74.69.
It’s interesting though that copper is up 0.5% and normally it’s more exposed to global growth. That might highlight less-favorable market psychology in crude.
EU News
Major European stock indices tumbles
- Sharp declines across the board in Europe
The major European stock indices are closing sharply lower. The major indices could not dodge the bullet that the US indices are seemingly getting through despite the fact that the focus of the banking crisis is a centered in the US.
Looking at the closing levels:
- German DAX fell -3.04%
- France’s CAC fell -2.90%
- UK’s FTSE 100 fell -2.58%
- Spain’s Ibex fell -3.51%
- Italy’s FTSE MIB fell -3.8%
Eurozone finance ministers: Broad-based fiscal stimulus is not warranted
- Statement from finance ministers
This statement is regarding the energy market and inflation, not what’s happening in the US.
- We agree that over 23-24 that prudent fiscal policies should aim at ensuring medium-term debt sustainability
- Broad-based fiscal stimulus to aggregate demand is not warranted
- Given strong spillovers in energy markets, eurozone economies will coordinate measures to preserve integrity of single market and competitive playing field
- Will continue to phase out energy support measures, which would also contribute to reducing govt deficits
If the banking crisis spills over to Europe, it will be from one crisis to another.
ECB still ‘hopes’ to do a 50 bps hike – report
- ECB to push ahead with 50 bps?
MNI is out with a story saying the ECB ‘hopes to push ahead with its plans to hike by 50 basis points’. It cites eurosystem sources.
Other News
Andrea Maechler to leave for Swiss National Bank
- She will become deputy general manager of the BIS
The Swiss National Bank has an opening on its rate-setting committee as Andrea Maechler will join the BIS as deputy general manager on September 1, according to a release.
She’s been at the SNB since 2015 and was previously at the IMF.
US Pres. Biden: Investors in the banks will not be protected
US President Joe Biden said on Monday that no losses will be borne by US taxpayers following the collapse of Silicon Valley Bank and Signature Bank.
Biden further noted that investors in those banks will not be protected and reminded that “no one is above the law.”
Biden also explained that the quick administration action should give Americans confidence that the US banking system is safe and added that he will ask Congress and regulators to strengthen bank rules.
Cryptocurrency News
Bitcoin is up over 22% since the low last week
- When bitcoin is a safe haven are we in trouble?
The price bitcoin is currently trading just short of the $24,000 level. The high price reach $24,618. The low price is way down at $21,900 today. On Friday, the low price reached $19,569. Since then, the price is up around 22.5%.
In that time, two banks have officially gone under, but the FDIC has guaranteed all deposits at all institutions.
Despite the crisis and concerns, but the FDIC backing, the price of bitcoin has pushed higher. Is crypto the safe haven? I don’t know. It would seem that crypto exchanges/brokers could have similar risks as a SVB.
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