North American News
US equities finish at the highs of the day as fear quickly turns to FOMO. April goes green
- S&P 500 up 0.9% on the day
Here’s how the week played out.
It started with worries about First Republic Bank and that ultimately led to a death spiral of the company as it reported much larger deposit outflows than anticipated. Shares hit $16 on Monday and are finishing the week around $3.50 with an FDIC takeover looming.
When Meta later had great earnings as well and some others were solid, that was enough to turn the tide and quickly led to FOMC. That feeling extended today despite some modest warnings about data centers from Amazon.
Here are the closing changes in North American markets today:
- S&P 500 +0.9% — up 39 points to 4192
- DJIA +0.8%
- Nasdaq Comp +0.7%
- Russell 2000 +1.0%
- Toronto TSX Comp +0.5%
On the week:
- S&P 500 +0.9%
- DJIA +0.9%
- Nasdaq Comp +1.3%
- Russell 2000 -1.3%
- Toronto TSX Comp -0.3%
On the month:
- S&P 500 +1.5%
- DJIA +2.5%
- Nasdaq Comp flat
Seasonally, April is the strongest month of the year and it’s another victory for that trade but it certainly wasn’t smooth sailing.
US March PCE core inflation 4.6% vs 4.5% expected
- US core PCE from the US personal consumption expenditure report for March 2023
- Prior was +4.6% (revised to 4.7%)
- PCE core MoM +0.3% vs +0.3% expected
- Prior MoM +0.3%
- Headline inflation PCE +4.2% vs +4.6% prior (Prior revised to 4.7%)
- Deflator MoM +0.1% vs +0.3% prior
Consumer spending and income for March:
- Personal income +0.3% vs +0.2% expected. Prior month +0.3%
- Personal spending 0.0% vs -0.1% prior
- Real personal spending 0.0% vs -0.1% expected (prior +0.2%)
Shares of First Republic fall more than 40% as receivership looms
- CNBC reports that FDIC receivership is most likely scenario
CNBC’s David Faber reporting that First Republic Bank is more likely to head into FDIC receivership this weekend then find a way to strike a private sector deal.
From receivership, there are banks who are lining up to take it from there.
The shares of FRC are being crushed on this and that’s spread somewhat to broader US indicies. What’s striking for me is that earlier, Faber reported virtually the same thing, only he was less explicit about it.
It goes to show you that there are always opportunities for anyone paying attention.
Here’s a Goldman Sachs note about the effects of banking stress on the real economy:
Although banking stress “may be behind us, the market still doesn’t have clarity on the growth drag .. I’m of the instinct that impingement on the provision of bank credit will slowly, if almost imperceptibly, feed through.”
Our team “still assumes that a moderate tightening of credit will take the form of a slower-motion credit crunch, which shaves 40 bps of US GDP in 2023. I’m certainly hoping this proves to be correct, as it would be a very tidy outcome.”
April final UMich consumer sentiment 63.5 vs 63.5 expected
- UMich consumer sentiment data for April 2023
- Prelim was 63.5
- Prior was 62.0
- Current conditions 68.2 vs 68.6 prelim (66.3 prior)
- Expectations 60.5 vs 60.3 prelim (59.2 prior)
- 1-year inflation 4.6% vs 4.6% prelim (3.6% prior)
- 5-10 year inflation 3.0% vs 2.9% prelim (2.9% prior)
Atlanta Fed GDPNow initial estimate for Q2 growth at 1.7%
- The 1st quarter model nailed the advanced GDP level announced yesterday
The initial model estimate for Q2 growth from the Atlanta for GDPNow model, comes in at 1.7%.
In their own words:
The initial GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2023 is 1.7 percent on April 28. The initial estimate of first-quarter real GDP growth released by the US Bureau of Economic Analysis on April 27 was 1.1 percent, equal to the final GDPNow model nowcast released on April 26 after rounding.
Dallas Fed trimmed mean PCE price index +3.4% annualized in March
- One-month annualized core inflation measure from the Dallas Fed
March inflation annualized on the trimmed mean was 3.4%, according to the Dallas Fed measure. That’s down from 4.6% in February. The 12-month trimmed mean was 4.7, unchanged from Feb.
Some of the drags that were excluded were:
- Auto rentals
- Fruit
- Eggs
- Used trucks
- Gasoline
Some of the high numbers excluded:
- Hotels
- Child care
- Motor vehicle leasing
- Hospital services
Some notable numbers included in the trimmed mean:
- Owner occupied homes +6.0% (this is 11% of the PCE index)
- Vehicle maintenance and repair +4.0%
- Prescription drugs +1.7%
- Physician services +1.1%
US employment cost index for Q1 +1.2% q/q vs +1.1% expected
- US employee cost data
- Employment cost index for Q1 % vs 1.0% last quarter
- Wages +1.2% vs +1.0% last quarter
- Benefits +1.2% vs +0.8% last quarter
Commodities
Gold holds steady around $1990s after data shows persistent inflation
- Gold price makes minor gains as stickier inflation prompts the Federal Reserve to tighten.
- CME FedWatch Tool indicates the odds of a Fed rate hike at 83.1%.
- XAU/USD Price Analysis: To test the YTD high above $2009.75; otherwise, it could challenge the 50-day EMA.
Gold price registers minimal gains, as traders brace for the weekend, gains 0.16%% after data from the United States (US) showed that inflation remains at high levels, justifying the need for further tightening by the US Federal Reserve. After hitting a daily low of 1976.31, the XAU/USD is trading at $1992.93, up 0.28%.
Gold price edged high but was capped within the weekly trading range
US equities continued to climb. A report by the US Department of Commerce showed inflation in the United States had decelerated, with the Personal Consumption Expenditure (PCE) rate slowing from 5.1% to 4.2% in YoY readings. The monthly growth rate increased to 0.1%, below the prior month’s 0.3%. Despite this deceleration, the Fed’s preferred gauge for inflation, the core PCE, remained unchanged at 4.6% YoY, suggesting that inflationary pressures remain stickier than estimates. As a result, investors continued to believe that the Fed would raise rates.
That’s shown by the CME FedWatch Tool, with odds for a 25 bps increase at 83.1, lower than the previous day’s 83.9% chances.
Gold prices remained supported by falling US Treasury bond yields. As of writing, the 2-year Treasury bond yield drops 3.5 bps and yields 4.039%, while the 10-year benchmark note rate sits at 3.443% and collapses 8 bps.
In other data, the University of Michigan (UoM) Consumer Sentiment remained unchanged at 63.5, with inflation expectations for 1-year standing at 4.6% and a 5-year horizon at 3%.
Baker Hughes US oil rig count unchanged at 591
- Gas rigs rise by 2
- Oil rigs at 591 vs 591 prior
- Gas rigs at 161 vs 159 prior
Oil reverses to end six-month losing streak
- April finishes the month higher as oil rallies $3 from the lows
Oil settled up $2.02 to $76.78 after falling as low as $73.80. That turn was just enough to end a six-month losing streak along with a streak of 9 losses in the past 10 months.
Still, oil was lower on the week and remains in the middle of the range since the start of December. In the past six weeks, it’s tried to break both to the downside and the upside as it frustrates both sides.
EU News
European equity close: Decent gain on the day but down for the week
- Closing changes for the main European bourses
Daily changes:
- Stoxx 600 +0.5%
- German DAX +0.7%
- UK FTSE 100 +0.4%
- French CAC flat
- Spain IBEX -0.9%
- Italy MIB -0.3%
Weekly changes:
- Stoxx 600 -0.6%
- German DAX +0.1%
- UK FTSE 100 -0.7%
- French CAC -1.3%
- Spain IBEX -2.0%
- Italy MIB -2.4%
Germany April preliminary CPI +7.2% vs +7.3% y/y expected
- Latest data released by Destatis – 28 April 2023
- Prior +7.4%
- CPI +0.4% vs +0.6% m/m expected
- Prior +0.8%
- HICP +7.6% vs +7.8% y/y expected
- Prior +7.8%
- HICP +0.6% vs +0.8% m/m expected
- Prior +1.1%
Other News
Reminder: Monday is a holiday in much of the world
- Monday is the May day holiday
Monday is international workers day and that means holidays in China, Germany, Switzerland, France, the UK and others.
The holidays will slow the start to the trading week but overall, it’s a huge week for economic data including Monday’s US ISM manufacturing index.
For more see the news section.
Why directional FX calls are so hard this year? – BofA
- That’s one way of putting it
Bank of America Global Research discusses the disappointing directional FX calls so far this year.
“Looking at G10 FX so far this year as April ends, it looks far from what the consensus was expecting. Despite USD bearishness, the USD is in the middle of the G10 group. The CHF is the best performer despite being overvalued, followed by GBP despite the strong bearish consensus.. JPY dropped further despite being one of the worst performers last year and market expectations for BoJ policy changes this year.
“Looking ahead, the consensus remains bearish on the USD. Our positioning indicators show a long EURUSD position. Our surveys show an even more negative USD sentiment. We have also been expecting the USD to weaken this year, but EURUSD is already at our end-year 1.10 forecast, while our 1.15 2024 forecast reflects a cautious path. And we have warned that the USD will be choppy on the way down. We believe conflicting forces will continue making it very challenging for G10 FX in the rest of the year,” BofA adds.
Cryptocurrency News
It’s feast-or-famine in the bitcoin market
- Yet-another sharp move in bitcoin
Bitcoin this week is an extremely sloppy market with big ups and downs seemingly for no reason.
A fresh move is underway with BTC falling $300 in moments. The hourly chart shows the huge moves earlier this week in both directions.
Ultimately, no market participant likes extreme volatility especially when it’s not tied to news.
Technically, the latest high failed to break Wednesday’s high and that’s also bearish. Still, it’s a market that demands caution.
Shiba Inu price in Catch-22 as price action could slide below $0.00001000 again
- Shiba Inu price barely moves in Friday trading.
- SHIB could see a breakdown with a quick slide below $0.00001000.
- The weekly low could get tested and print a negative performance for this week with a 5% devaluation at hand.
Shiba Inu (SHIB) price is trading sideways as the US trading session is underway before closing off this Friday. After some sharp moves and a pickup in volatility on Wednesday and Thursday, price action is nearly dead early Friday, moving as it is in a tight range. With the divergence in the Relative Strength Index (RSI) pointing to the downside, bears are silently planning a last push for this trading week below $0.00001000.
Like our recently launched pages. Join our community and never miss a beat in the dynamic world of trading.
https://www.facebook.com/BilalsTechLtd
https://www.linkedin.com/company/bilals-tech/
