The banking crisis in the US is getting worse. Inflationary pressures in Europe persist

May 3, 2023

The US stock indices fell again Tuesday as the banking crisis continues. The KBW regional banking index fell more than 6% to its lowest level since November 2020. The Dow Jones Index (US30) was down by 1.08%, and the S&P 500 Index (US500) fell by 1.16% at the stock market’s close. The NASDAQ Technology Index (US100) decreased by 1.08% yesterday.

Regional banks fell sharply yesterday as fears of further stress on small lenders persist amid fears that higher interest rates will hurt banks open to long-term assets, including Treasuries and commercial loans.

The US Bureau of Labor Statistics (BLS) showed yesterday that the number of job openings in March fell to 9.590 million, below estimates of 9.775 million, according to the JOLTs report. At the same time, the US Commerce Department reported that manufacturing orders rose by 0.09% from the previous month, exceeding estimates.

Concerns about the economy were exacerbated by new fears that the US could default as early as June 1 if Congress does not raise the debt ceiling. Treasury Secretary Janet Yellen warned Monday that the United States could run out of cash and default on its debt as early as June 1.

Uber (UBER) jumped by 11% after reporting lower-than-expected first-quarter losses and optimistic forecasts.

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Equity markets in Europe traded flat on Tuesday. German DAX (DE30) decreased by 1.23%, French CAC 40 (FR40) fell by 1.45% yesterday, Spanish IBEX 35 (ES35) lost 1.72%, British FTSE 100 (UK100) closed on Tuesday down by 1.24%.

The overall inflation rate in the Eurozone rose in April, remaining well above the European Central Bank’s target levels, but the rise in core prices slowed down. The annualized consumer price index rose from 6.9% to 7.0%. Core inflation (which excludes food and energy prices) fell from 5.7% to 5.6%. Instead of providing some clarity as to how much the central bank might raise rates, the latest numbers have only blurred the picture. Market participants are debating whether the ECB will raise rates on Thursday by 50 or 25 basis points. On the one hand, rising overall inflation could prompt hawkish ECB officials to advocate another 0.5% hike. On the other hand, a slowdown in core price growth could shift the balance towards a more dovish stance and lead to a compromise 25 basis point rate hike.

Gold moved back above $2,000 an ounce on Tuesday as talk of a potential US default led investors to look for safe-haven assets. If gold maintains its current upward trend, the spot price could try again to reach an April high of around $2,050 or higher.

Oil fell more than 5% yesterday due to fears of a US default. Now the next step is up to OPEC+. There is a high probability that the cartel will cut its daily production even more. OPEC+ will try by all means to keep oil prices above $80 a barrel.

Asian markets were mostly rising yesterday. Japan’s Nikkei 225 (JP225) gained 0.12%, China’s FTSE China A50 (CHA50) didn’t trade yesterday, Hong Kong’s Hang Seng (HK50) gained 0.20% on the day, India’s NIFTY 50 (IND50) jumped by 0.46%, while Australian S&P/ASX 200 (AU200) showed a negative result of 0.92% decline on Tuesday.

S&P 500 (F) (US500) 4,119.59 −48.28 (−1.16%)

Dow Jones (US30)33,684.53 −367.17 (−1.08%)

DAX (DE40) 15,726.94 −195.44 (−1.23%)

FTSE 100 (UK100) 7,773.03 −97.54 (−1.24%)

USD Index 101.90 −0.25 (−0.25%)

Important events for today:

– New Zealand Unemployment Rate at 01:45 (GMT+3);
– New Zealand RBNZ Gov Orr Speaks at 02:00 (GMT+3);
– Australia Retail Sales (m/m) at 04:30 (GMT+3);
– Eurozone Unemployment Rate (m/m) at 12:00 (GMT+3);
– US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+3);
– US ISM Services PMI (m/m) at 17:00 (GMT+3);
– US Crude Oil Reserves (w/w) at 17:30 (GMT+3);
– US FOMC Statement at 21:00 (GMT+3);
– US Fed Interest Rate Decision at 21:00 (GMT+3);
– US FOMC Press Conference at 21:30 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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The banking crisis in the US is getting worse. Inflationary pressures in Europe persist