North American News
Tech stocks rebound from the lows to leave US equities largely unchanged
- Closing changes in North America
Closing changes for the main North American market indexes:
- S&P 500 +0.1%
- DJIA +0.2%
- Nasdaq Comp -0.2%
- Russell 2000 -0.2%
Tomorrow we get earnings from big tech starting with Microsoft and Alphabet but I’ll be carefully watching Cleveland-Cliffs and Whirlpool for signs of economic strength.
Chicago Fed March national activity index -0.19 vs -0.19 prior
- No change in the Chicago Fed composite index
- Prior was -0.19
- 3 of the 4 broad categories were negative
First Republic reports fell 40.8% since year end to $104.5 billion
- Analysts expected deposits between $130-$145B at the end of Q1
Analysts forecast deposits would fall to somewhere in the range of $135-$145B at quarter end but they were at $104.5B including the $30B from large US banks and fell to $102.7B to April 21. The company said deposits were at $173.5 billion on March 9, so it was a swift drop.
Neal Holland, Chief Financial Officer of First Republic said, “With the closure of several banks in March, we experienced unprecedented deposit outflows. We moved swiftly and leveraged our high- quality loan and securities portfolios to secure additional liquidity. We are working to restructure our balance sheet and reduce our expenses and short-term borrowings.”
Here is the key passage of the earnings release:
On March 16, 2023, First Republic received uninsured deposits totaling $30 billion from a group of America’s largest banks. This support for First Republic allowed the Bank to reduce its short-term borrowings. At that time, daily deposit outflows had slowed considerably.
Deposit activity began to stabilize beginning the week of March 27, 2023, and has remained stable through Friday, April 21, 2023. Total deposits were $102.7 billion as of April 21, 2023, down only 1.7% from March 31, 2023, primarily reflecting seasonal client tax payments that occur each April.
In response to the unprecedented deposit outflows, the Bank enhanced its financial position through access to additional liquidity from the Federal Reserve Bank, the Federal Home Loan Bank and JP Morgan Chase & Co. Total borrowings peaked on March 15, 2023, at $138.1 billion. At that time, the Bank had $34.0 billion of cash on its balance sheet. Total borrowings totaled $104.0 billion, and cash and cash equivalents totaled $10.0 billion as of April 21, 2023. This includes $25.5 billion of long-term advances with the Federal Home Loan Bank, compared to $7.3 billion as of December 31, 2022.
As a result of the recent events, the Bank is taking actions to strengthen its business and restructure its balance sheet. These actions include efforts to increase insured deposits, reduce borrowings from the Federal Reserve Bank, and decrease loan balances to correspond with the reduced reliance on uninsured deposits. Through these actions, the Bank intends to reduce the size of its balance sheet, reduce its reliance on short-term borrowings, and address the challenges it continues to face. Refer to the Forward-Looking Statements below.
The Bank is also taking steps to reduce expenses, including significant reductions to executive officer compensation, condensing corporate office space, and reducing non-essential projects and activities. The Bank also expects to reduce its workforce by approximately 20-25% in the second quarter.
In addition to these actions, the Bank is pursuing strategic options to expedite its progress while reinforcing its capital position.
US March retail sales revised to -0.6% from -1.0%
- US March retail sales revised higher
The US Commerce Dept has issued benchmark revisions to retail sales and that’s led to a positive change to the March data.
- Retail sales -0.6% vs -1.0% initially
- Ex autos to -0.4% vs -0.8% initially
- Ex autos and gas -0.3% vs -0.3% initially
- Ex autos, gasoline, building materials and food service -0.3% vs -0.3% initially
Dallas Fed manufacturing PMI -23.4 vs -15.7 prior
- Dallas-area manufacturing sentiment survey
- Prior was -15.7
- Production output +0.9 vs +2.5 prior
- New orders -9.6 vs -14.3 prior
- Shipments -2.8 vs -10.5 prior
- Prices paid +19.5 vs +20.3 prior
- Prices received +8.4 vs +7.0 prior
- Company outlook -15.6 vs -13.3 prior
- Employment +8.0 vs +10.4 prior
Commodities
Gold trades flat, poised for potential gains amid light US economic agenda
- Fed Cook: Monetary policy enters uncertain phase, though expect PCE to slow down
- The Chicago Fed National Activity Index improved, but the Dallas Fed manufacturing index deteriorated.
- XAU/USD Price Analysis: Likely to remain sideways, between the 20 and 50-day EMAs.
Gold price is trading sideways amidst the lack of a catalyst during Monday’s North American session, though likely to remain underpinned by US Dollar (USD) weakness and falling US Treasury bond yields. A risk-on impulse keeps the greenback pressured during a week of a light US economic agenda. At the time of writing, the XAU/USD is trading at $1983.50, almost flat.
Gold traders eye uncertain Fed policy as US bond yields tumble
US stocks fluctuate between gainers and losers as the week begins. With US Federal Reserve (Fed) officials getting into the blackout period, Gold traders are leaning to last Friday’s Lisa Cook, Fed Governor words. She said that monetary policy is moving into an uncertain phase and added that banking sector headwinds could weigh on the rate-rising outlook. Cook expects March PCE inflation to decelerate and refrained from asserting the same to core PCE.
US Treasury bond yields, across the board, continue to tumble, a headwind for the greenback. The US Dollar Index (DXY), a measure of the buck’s value against a basket of peers, lost traction, sliding 0.22%, and was last seen at 101.507, a tailwind for XAU/USD.
Expectations of the US Federal Reserve hiking rates by 25 bps in the next week lie at 90%, as shown by the CME FedWatch Tool. Nevertheless, traders estimate that the US central bank “could” cut rates by the September meeting, followed by another one in December.
Over the weekend, reports via the Financial Times reported that central bankers are buying gold, spurred by increased geopolitical tensions, as the World Gould Council said. The reports showed that central banks increased by 152% YoY in 2022.
Data-wise, the US economic docket featured the Chicago Fed National Activity Index (CFNAI) for March, which plunged to -0.19, above estimates of -20, unchanged from February’s reading. The three-month moving average ticked up to 0.01%, which jumped from -0.09 in February, a sign that the economy continues to expand at a slower pace.
Of late, the Dallas Fed Manufacturing Business Index in April plummeted to -23.4, well below the -11.00 estimated, as the survey showed that perceptions of broader business conditions worsened, according to the poll. The rate of change of orders and shipments improved, but both readings remained in negative territory.
Silver bulls take back control within channel
- Silver is higher and bulls are taking over control within the channel.
- A breakout of structure is occurring, bid above $25.00.
WTI crude oil futures settle at $78.76
- Up $0.89 or 1.14%
WTI crude oil futures settled at $78.76. That is up $0.89 or 1.14%.
EU News
ECBs Makhlouf: It is too early to plan for a pause in our tightening of policy
- ECB Makhlouf now speaking:
- On the evidence so far, it is too early to start planning for a pause in our tightening of policy.
- We will be especially focused on incoming data at our next policy decision
- Based on the evidence we have today rates will need to continue at restrictive levels
ECB’s Villeroy on rate hikes: We have travelled most of the journey
- Villeroy hints that that hiking is mostly done
- Some wage increase catch-up with inflation is normal
- There may be a need for some additional interest rate increases but they must be limited in number and size
ECB’s Schnabel: 50 basis points are not off the table
- Comments from the ECB’s Schnabel
- Says she thinks core inflation will peak in the next few months but it’s not clear that it will happen very soon
- According to most-recent ECB projections, we’re not seeing a recession
- Far too early to declare victory on inflation
- Headline inflation is coming down relatively quickly
- We need to see a sustained decline in core inflation that gives us confidence that our measures are starting to work
- The entry of China into the world economy was a key disinflationary factor over the past decades. If that reverses, the effect on inflation could also reverse
Other News
China reportedly calls for banks to further cut deposit rates
- Reuters reports, citing seven people with knowledge of the matter
The move here is part of the country’s efforts to convert household savings into consumption as well as more productive investment activities, in order to try and bolster the economy further amid the pandemic recovery.
The report says that members of China’s “interest rate self-regulatory mechanism” (mostly banks) met this month and were urged to reduce deposit rates, after receiving guidance from the PBOC.
One of the sources said that “the message is that banks need to collectively bring down deposit rates”. Adding that even with money being injected into the banking system, “what is the point if people save every cent they get, instead of spending or investing?”.
This is but another headline and story that confirms China’s pledge to prop up economic activity as the country continues to recover from the end of Covid-19 restrictions in December last year.
Another big earthquake in Asia-Pacific, another tsunami warning
- Magnitude 7.4 quake west of Indonesia’s Sumatra island
199 km W of Padang, Indonesia
Depth 16km
Cryptocurrency News
Bitcoin staying below its 100 hour moving average. Bearish bias in the short term.
- Low price today enters into a swing area between $26,526 and $27,236
Bitcoin is trading currently at $27,379. The low price reached $27,045. The high price was at $27,998.
Looking at the hourly chart, the high prices during trading today today tested the falling 100 hour moving average currently at $27,709. Sellers leaned near that moving average level (on 2 tests), and in doing so, kept the bias from a technical perspective to the downside. With the moving average holding, it increases the levels of importance going forward. Move above and we should see upward probing as sellers are disappointed.
Until then, however, the sellers remain more in control in the short term.
Bitcoin to $100,000? Possible by end of 2024, says Standard Chartered
- The firm says that the supposed “crypto winter” is over
In their latest note, Standard Chartered’s head of digital assets, Geoff Kendrick, says that Bitcoin could gain from recent developments in the market. That includes the banking turmoil and also the stabilisation of risk assets as the Fed draws nearer to the end of its tightening cycle.
“While sources of uncertainty remain, we think the pathway to the $100,000 level is becoming clearer.” Adding that Bitcoin could hit that market by the end of next year.
Well, these outrageous calls have been quite a common theme when it comes to Bitcoin forecasts and this just adds to that long list. If you need a reminder, a Citi analyst had previously, during the pandemic, called for Bitcoin to hit above $300,000 by the end of last year. I mean, we did see it went on to hit a record high of $69,000 in November 2021 but during last year itself, Bitcoin fell by a whopping 64%.
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/
