North American News
US equities go for a ride. Heavy late buying saves the day
- Closing changes for the US stock markets
- S&P 500 +1.6% (up 60 points to 3916)
- Nasdaq +2.1%
- Russell 2000 +2.3%
- DJIA +1.1%
US February CPI 6.0% y/y vs 6.0% expected
- Highlights of the US February 2023 CPI report
- Prior was +5.5%
- m/m CPI +0.4% vs +0.4% expected
- Prior m/m reading was +0.5%
- Real weekly earnings -0.4% vs +0.7% prior (revised to +0.3%)
Core inflation:
- Ex food and energy +5.5% vs +5.5% y/y expected
- Prior ex food and energy +5.6%
- Core m/m +0.5% vs +0.4% exp
- Prior core m/m +0.4%
- Core services ex shelter +0.43% vs +0.265% prior
More details (m/m)
- Used cars -2.8% vs -1.9% prior
- New cars +0.2% vs +0.2%
- Shelter +0.8% vs +0.7% prior
- Transportation services +1.1% vs +0.9% prior
- Energy -0.6% vs +2.0% prior
- Food +0.4% vs +0.5% prior
Cleveland Fed median CPI +0.6% m/m vs +0.7% prior
- Median CPI is the one-month inflation rate of the component whose expenditure weight is in the 50th percentile of price changes
The Cleveland Fed does some of the math on the US CPI print to offer a picture of underlying inflation and it continues to be problematic.
- median CPI +0.6% m/m vs +0.7% prior
- 16% trimmed mean +0.5% vs +0.6% prior
- Median y/y 7.2% vs 7.1% prior
- 16% trimmed mean +6.5% vs +6.6% prior
US regional banks start hot, end cold
- Several banks end the day lower
It was a bonanza for regional bank stocks to start the day but several of them on my screen are now negative on the day, while the KRE regional bank ETF has pared its gain to just 0.57%. The big question is whether or not we see more banks taken over by the FDIC in the next day or so. If more get taken over then it adds risks for the remainder.
Commodities
Gold to trend above $1,925 later in the year, with convincing upside risk – TDS
Gold jumped to the highest in over a month. Economists at TD Securities see the yellow metal trading above $1,925 in the latter months of this year.
Long-term looks good for Gold
“Ironically, higher rates now are good for Gold later on as they would drive rates lower faster along the long end of the curve. The resulting Dollar weakness should be accretive for Gold longer term too.”
“Since there have been a lot of references to skewing policy to favor the lower end of income distribution, we judge the cuts would be aggressive as high unemployment would hurt that demographic most. To the extent that cuts real rates to levels below previous cyclical norms, Gold should benefit.”
“We expect prices to trend above $1,925 later in the year, with a significant upside risk in the months to come.”
WTI crude settles at the lows of the year
- WTI crude oil down $3.47 to $71.33
There are a few things to watch in WTI crude:
1) This is a bit of a strange move because the risk trade has improved today and fellow global-growth commodity trade copper is flat this week.
2) The API oil inventory data is out later today and that leaks. Oil rebounded from early lows only to get pounded late in the day in the window when it would have leaked. I wouldn’t be surprised to see a big surprise build in that data. When that’s happened in the past, the API sellers use the actually data to cover (ie. buy it back).
EU News
UK February payrolls change 98k vs 102k prior
- Latest data released by ONS – 14 March 2023
- Prior 102k
- January ILO unemployment rate 3.7% vs 3.8% expected
- Prior 3.7%
- January employment change 65k vs 52k expected
- Prior 74k
- Average weekly earnings +5.7% vs +5.7% 3m/y expected
- Prior +5.9%; revised to +6.0%
- Average weekly earnings (ex bonus) +6.5% vs +6.6% 3m/y expected
- Prior +6.7%
Spain February final CPI +6.0% vs +6.1% y/y prelim
- Latest data released by INES – 14 March 2023
- HICP +6.0% vs +6.1% y/y prelim
The core reading is the one to watch here as it is seen up from 7.5% in January to 7.6% in February. That reaffirms that inflation pressures are still riding high in Europe to start the new year.
Switzerland February producer and import prices -0.2% vs +0.7% m/m prior
- Latest data released by the Federal Statistics Office – 14 March 2023
- Prior +0.7%
- Producer and import prices +2.7% y/y
- Prior +3.3%
Other News
SVB failure is just “part of the process” of tighter financial conditions – Morgan Stanley
- Comments by Morgan Stanley’s co-president, Edward Pick
He says that the collapse of SVB and the market turmoil that ensued after is just “part of the process” as the world adjusts to tighter financial conditions following years of easy money.
“This is part of the process of the knob being turned to tighten financial conditions to make sure that we are on our way to normalising a higher interest rate world. But there might well be surprises, there might well be reactions.”
Russian fighter clips US drone propeller of the Black Sea, causes crash landing
- US Reaper drone brought down over the Black sea
I don’t think this has an implications for markets because it was an unnamed drone over international waters but the US says the Russian jets dumped fuel on the American surveillance drone before clipping its propeller and forcing US remote pilots to bring down the unmanned aircraft into international waters.
Cryptocurrency News
Bitcoin screams to a nine-month high in an impressive rally and falls just as impressively
- Bitcoin up $5000 in two days and ends the day where it started
What a run for bitcoin.
The $26,000 barrer was a big one and it’s given way now in a rousing rush into bitcoin.
Problems in the US banking sector and particularly in the crypto banking sector were evidently a validation of bitcoin. I get the sentiment but the industry needs on-and-off ramps for cash, particularly the wider ecosystem. Within that, I think, is part of the message here. Bitcoin itself shines much more brightly than many coins when there is trouble.
For now, price is narrative and this is the kind of breakout that attracts some serious FOMO.
At the time of writing bitcoin is trading at $25000
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