North American News
US equities hit session lows into the close. Tech struggles
- Closing changes for the main North American markets
US equities initially cheered the CPI report and S&P 500 futures were up 35 points but the positive mood slowly eroded and was capped by some heavier selling into the close.
Closing changes:
- S&P 500 -0.4%
- Nasdaq Comp -0.9%
- Russell 2000 -0.6%
- DJIA -0.1%
US March CPI 5.0% y/y vs 5.2% expected
- US March 2023 consumer price index data
- Prior was +6.0%
- m/m CPI +0.1% vs +0.2% expected
- Prior m/m reading was +0.4%
- Real weekly earnings -0.1 % vs -0.4% prior
Core inflation:
- Ex food and energy +5.6% vs +5.6% y/y expected
- Prior ex food and energy +5.5%
- Core m/m +0.4% vs +0.4% exp (unrounded +0.385%)
- Prior core m/m +0.5%
- Shelter rose +0.6% vs +0.8% prior
- Services ex shelter 0.0%
- Core services ex shelter +0.4% vs +0.43% prior
Fed minutes: Participants noted they considered keeping rates unchanged
- The minutes of the latest FOMC meeting show that Fed staff forecast a mild recession later this year
- Actions taken to calm conditions lowered near-term risks, allowing them to judge a hike as appropriate
- Several participants noted they considered whether it would be appropriate to leave rates unchanged
- Several participants noted wage growth was still well-above rates consistent with 2% inflatio ntarget
- Participants assessed that labor demand is substantially exceeding supply
- Generally saw inflation risks tilted higher
- Tightening credit was likely to weigh on demand, which could help inflation
- Little evidence pointing to disinflation for core services excluding housing
- Fed staff forecast a mild recession
Fed’s Barkin: I definitely see demand cooling
- Fed’s Barkin on CNBC
- Says he’s watching credit conditions
- we are certainly past peak inflation, still a ways to go
- my view is we react to inflation as it comes in, in terms of rate path
- looking very hard at the man, labor market inflation
- credit card data giving me some comfort to me and is calling
- if you want to get inflation back to goal, you need multiple months where it’s headed their
- not hearing there is much change in bank lending at the moment
- not seeing evidence of inflation cracking yet
Feds Daly: Fed has more work to do on rate hikes
- San Francisco Pres. Mary Daly remains on the hawkish side
- Strength of the US economy, elevated inflation suggests more work to do on rate hikes
- Prudent Fed policy requires calibrating decisions based on all the data.
- She sees a good reason that economy may keep slowing even without further rate hike’s
- we are committed to ensuring all deposits are safe. Becky system is sound and resilient
- US economy remains strong, labor market extremely tight
- Fed must monitor tightening credit conditions in determining path of rates
- Remains resolute, committed to 2% inflation goal
- Global headwinds, lagging impact of fed funds rate hike’s are also factors in setting policy
- Bank stresses have stabilized
- Fed has tools for monetary policy, financial stability and they don’t compete with each other
- Expects inflation to end 2023 a little above 3%
- Inflation expectations are anchored, allowing us to take a couple of years to bring down inflation
- Policy tightening is at a point now where we don’t expect to continue to raise rates every meeting
- There is a sense we will get rates up to a level and stay
- Does not want to forecast the end of a tightening cycle
- Inflation report today was good news
- Will look in CPI inflation to see if core services ex housing are coming down
U.S. Treasury auctions off $32 billion of 10 year notes at a high yield of 3.455%
- WI level at the time of the auction was 3.435%
- High-yield 3.455%
- WI level at the time of the auction 3.435%
- Tail 2.0 basis points versus six-month average of 0.1 basis points
- Bid to cover 2.36X vs six-month average of 2.6X
- Directs 19.9% vs six-month average of 18.7%
- Indirects 62.3% versus six-month average of 61.4%
- Dealers 17.1% versus six-month average of 19.9%
Commodities
Gold crawls higher amid mixed US inflation data
- Gold price extended its gains on mixed US economic data.
- US CPI cooled down, but Core CPI was unchanged, indicating sticky inflation.
- XAU/USD Price Analysis: Likely to remain bullish, but a drop below $2,000 would pave the way to $1,950.
Gold price resumes to the upside after hitting a low of $2001, following a mixed US inflation report. Furthermore, recent Fed officials’ mixed comments about overtightening monetary policy keep the American Dollar (USD) pressured. At the time of typing, the XAU/USD is trading at $2,005.34, above its opening price by a minuscule 0.11%.
US CPI cools down, though core CPI remains stickier
The US Bureau of Labor Statistics (BLS) revealed that March’s Consumer Price Index (CPI) rose less than the 5.2% expected, tumbling from 6% to 5% YoY, in figures revealed ahead of the Wall Street open. Nevertheless, not everything is positive news, as the Core CPI, which excludes volatile items, was unchanged at 5.6% YoY.
The yellow metal reacted upwards, reaching a new daily high at $2,028.32. It has retreated some of those gains as it meanders shy of the $2,010 area. Contrarily, the US Dollar (USD) extended its downtrend to two straight days of losses, as shown by the US Dollar Index (DXY), which measures the performance of six currencies against the USD. The DXY exchanges hands at 101.546, down 0.58%, threatening to dip below the 101.000 mark.
Another reason for Gold’s jump was that US Treasury bond yields dropped sharply, with the 2-year bond yield collapsing 14 bps, before erasing some of those losses. Nevertheless, traders’ bets that the US Federal Reserve (Fed) would continue to tighten monetary conditions stood tall at 67.2% for a 25 bps rate hike, compared to Tuesday’s 72.9%.
Of late, the Richmond Fed President Thomas Barkin said that the report was aligned with expectations but added that although inflation has peaked, “there is still some way to go.” Furthermore, he said that before the May meeting, the PCE and the ECI would be crucial to assess his stance at the upcoming meeting.
WTI crude oil futures settle at $83.26
- Highest close since November 16, 2022
The price of WTI crude oil is settling at $83.26. That’s up $1.73 or 2.12%. The close is the highest close since we were 16th 2022. The price moved above the 2023 high at $82.66 going back to January 18 and the December 1 high 2022 of $83.34. My price today reached a $83.53. The low price was at $81.28.
The next major target comes against the falling 200 day moving average. That moving average level currently comes in at $83.81. With the high price today of $83.53 today, the price got within $0.28 of that key moving average target level. The crude oil price has not traded above its 200 day moving average since August 30, 2022. Key level for both buyers and sellers going forward. Move above would be more bullish. Find sellers against the level, and move below $82.66 and there could be more downside probing.
EIA weekly crude oil inventories +597K vs -583K expected
- US weekly oil inventory data
- Prior was -3739K
- Gasoline -331K vs -1600K exp
- Distillates -606K vs -764K exp
- Refinery utilization -0.3% vs +0.5% exp
- Production 12.3 mbpd vs 12.2 mbpd prior
EU News
Major European indices close higher on the day
- A review of the European market indices. New record high for the CAC. German DAX closes at highest level this year.
- German DAX rose 0.31% at 15703.61. That was the highest close for the year and the highest close going back to January 2022
- France’s CAC rose 0.09% or 6.66 points. That is well off the high for the day which saw the index up 73.38 points at its high, but still was good enough for a record close.
- UK’s FTSE 100 rose 0.50% and represented the highest close since March 9
- Spain’s Ibex rose 0.44%
- Italy’s FTSE MIB rose 0.38%
ECB Holzman: Inflation outlook argues for another 50 basis point hike in May
- Hawkish comments from ECBs Holzman
- inflation outlook argues for another 50 basis point hike in May
- ECB needs to keep raising rates noticeably beyond May
- ECB may be able to accelerate QT from July
ECB’s Villeroy: Still have a little way to go with rate hikes
- Comments from Villeroy
- Deferred effect of our past rate hikes will be more significant that the one of our future decisions
- Too early to discuss the size of May move
Other News
Bank of America credit card data is a warning about the consumer
- Bank of America says retail sales likely dropped in March
Is this a sign of a looming consumer slowdown? Maybe not.
“In our view, the slowdown In Federal tax refunds In March, as reported by the Internal Revenue Service (IRS), contributed to the weakness in spending,” BAC writes. “The IRS Issued $84bn of refunds this March, which is $25bn less than the refunds issued in March 2022.”
In addition, supplemental food stamp benefits expired in March.
Goldman Sachs sees Fed terminal rate at 5.0% – 5.25% now
- New forecast takes out the June hike
Goldman Sachs has lowered its terminal fed target range to 5.0% -5.25% from 5.25% to 5.5%. They see a May 25 basis point hike but no longer see a June hike of the same magnitude.
They site the expectations for shelter costs to start to come down lowering the need for the Fed to continue hiking.
Cryptocurrency News
Bitcoin consolidates above and below 30K. Traders looking for the next shove
- The run higher is keeping most of the gains
The price of Bitcoin ran higher on Monday, after a long consolidation period that squeezed a downward sloping trend line toward a rising support trend line.
The price on the hourly chart moved above the downward sloping topside trend line on Monday at around $28700, and did not look back until it peaked at $30438 on Monday and started the more recent up and down consolidation range.
What next?
Clearly the buyers are trying to maintain control and keep the corrective pressure to a minimum. Having said that, the topside also has resistance sellers between $30,438 and $30,575 (three highs are within that area – see yellow area on the chart above).
So buyers and sellers are battling it out and looking for the next shove outside of the $29,830 to $30,575 range.
Warren Buffett: Bitcoin is a gambling token and doesn’t have any intrinsic value
- Comments from Warren Buffett
Warren Buffett warned there has been an explosion of gambling in financial markets and called bitcoin a gambling token. He warned that human nature wants to get rich quick but how he’s done it is “getting rich slowly and having lots of fun along the way”.
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