InvestMacro

By JustMarkets 

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.

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%)

• – 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.

By George Prior

As the US hurtles towards a potential high-stakes default on its debt, the compelling case for Bitcoin is further strengthened, asserts the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The assessment from deVere Group’s Nigel Green follows reports that US President Joe Biden has invited top congressional leaders for a May 9 meeting regarding the debt ceiling after The Treasury Department warned on Monday a default could come sooner than expected – possibly as soon as June 1.

The debt ceiling is the amount of money the US is able to borrow to pay its bills. Since the cost of running the government is far greater than federal tax revenues, the US must raise additional money by selling Treasury bonds – but it cannot do this after hitting the debt ceiling.

If the US is unable to pay its bills, it will default on its debt. This would be the first in US history.

Should this happen, it would “cause irreparable harm to the US economy, the livelihoods of all Americans, and global financial stability,” Janet Yellen, the Treasury Secretary, wrote in a letter to the then new House Speaker Kevin McCarthy.

In a letter to members of Congress on Tuesday, Ms Yellen said that “We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States.”

Her announcement came on the same day as the Congressional Budget Office (CBO) reported that there is a “significantly greater risk that the Treasury will run out of funds in early June.”

Nigel Green says: “The emergency meeting called by Biden is a step in the right direction in a monumentally high-stakes game between lawmakers.

“Democrats have said they would not negotiate with Republicans over extending the debt ceiling, while House Speaker Kevin McCarthy has promised not to extend the limit without cuts to the federal budget.”

While the likelihood of a US default remains “unlikely” at this stage, according to the deVere Group CEO, he affirms the debt ceiling drama “further strengthens the compelling case for Bitcoin” for two main reasons.

“First, this saga underscores that the US dollar’s future trajectory is precarious and lies in the hands of opposing and increasingly divided politicians reaching difficult agreements.

“As the gridlock in Washington DC intensifies over the dollar debt ceiling, it seems inevitable that a growing number of retail and institutional investors will want to circumnavigate the shenanigans and look to alternatives which are outside of political controls, as well as having other advantages such as being digital, global and borderless.
“It’s a huge mess and it’s hitting the dollar’s credibility at a time when it already appears to be losing some of its global dominance – this is bullish for Bitcoin.

He continues: “And second, the debt ceiling is likely to be raised in the end, meaning it can issue more debt to generate more capital. However, the government might find it hard to attract buyers, forcing the Federal Reserve back into Quantitative Easing (QE) – or money printing.

“QE is typically good for riskier assets such as Bitcoin – as we saw during the last stimulus round – and it will also likely further hit the long-term value of the dollar, providing a boost for the cryptocurrency.”

Nigel Green concludes: “The debt ceiling drama underlines the flaws in the current fiat-dominated system.

“It strengthens my long-standing argument that the times ahead are destined to be radically different from what we have all experienced in our lifetimes so far.

“I believe that increasingly, there will be a mixed system. Some will be currencies from governments, including digital and non-digital, and some will be digital and decentralised, such as Bitcoin.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

By JustMarkets 

At the close of the stock exchange on Monday, the Dow Jones Index (US30) decreased by 0.14%, and the S&P 500 (US500) lost 0.04%. NASDAQ Technology Index (US100) fell by 0.11% yesterday.

The US manufacturing activity declined for the sixth straight month in April, the longest period since 2009 and a sign of trouble in the manufacturing sector. Order numbers improved slightly but remained in contractionary territory. The good news is that the numbers show that the manufacturing sector is contracting at a slower pace. At the same time, manufacturers face many challenges, including higher borrowing costs, tighter credit conditions, lower demand for goods and still higher prices. A senior portfolio manager at Northwestern Mutual Wealth Management Co. believes Monday’s PMI data bolstered expectations for a 25 basis point increase in Federal Reserve interest rates in May and the likelihood of a June increase.

First Republic Bank was sold to JPMorgan Chase (JPM), the second-largest bankruptcy in US history. First Republic has been struggling since the March collapse of Silicon Valley Bank and Signature Bank. Yesterday morning, the US regulators seized First Republic Bank and sold all of its deposits and most of its assets to JPMorgan Chase Bank. As of April 13, First Republic had about $229 billion in total assets and $104 billion in total deposits, according to the FDIC. The FDIC estimated that its deposit insurance fund would suffer a $13 billion loss because of the transfer to First Republic.

The World Bank on Monday unveiled a new methodology and improved safeguards for assessing the business climate in 180 countries. The bank retracted its Doing Business rating in September 2021, citing an internal audit and an independent investigation that found that top World Bank officials pressured staff to change the data to favor China. A pilot issue of a new annual series called “Business Ready” will be published in the spring of 2024.

Stock markets in Europe did not trade yesterday due to the holiday. There is no doubt that Europe’s central bank will raise borrowing costs for the seventh consecutive time Thursday as inflation shows resilience. Many analysts are currently betting on a quarter-point hike. But if today’s consumer price data, especially the core indicator, shows signs of growth, the ECB could stay on an aggressive path to raise rates.

Weaker Chinese production data outweighed support for OPEC+ supply cuts, and oil is down again. Typically, from April through fall, oil prices rise because of increased demand during the summer months. But this year, economic conditions are outweighing demand. This could lead to OPEC+ countries having to cut production again to keep prices above $80 a barrel.

Asian markets rose strongly yesterday. Japan’s Nikkei 225 (JP225) gained 0.92% over the day, China’s FTSE China A50 (CHA50) added 0.77% yesterday, Hong Kong’s Hang Seng (HK50) increased by 0.27% over the day, India’s NIFTY 50 (IND50) jumped by 0.84%, and Australia’s S&P/ASX 200 (AU200) closed positive 0.35%.

Japan’s economy is recovering moderately from the downturn caused by COVID-19, but bankruptcies are rising, according to the Japanese government’s monthly economic report. The report echoes the warning of global financial volatility in response to the recent collapse of Western banks.

The Reserve Bank of Australia (RBA) unexpectedly raised its rate by 25 basis points, saying that further monetary tightening is still needed as it takes steps to rein in the country’s stubborn inflation. The RBA said in a statement that recent data showed a welcome decline in inflation, but the main forecast is still that it will be a couple of years before inflation returns to the upper end of the target range.

S&P 500 (F) (US500) 4,167.87 −1.61 (−0.04%)

Dow Jones (US30)34,051.70 −46.46 (−0.14%)

DAX (DE40) 15,922.38 0 (0%)

FTSE 100 (UK100) 7,870.57 0 (0%)

USD Index 102.17 +0.51 (+0.50%)

• – Australia RBA Interest Rate Decision (m/m) at 07:30 (GMT+3);
• – Australia RBA Rate Statement (m/m) at 07:30 (GMT+3);
• – German Retail Sales (m/m) at 09:00 (GMT+3);
• – Switzerland Manufacturing PMI (m/m) at 10:30 (GMT+3);
• – German Manufacturing PMI (m/m) at 10:55 (GMT+3);
• – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+3);
• – UK Manufacturing PMI (m/m) at 11:30 (GMT+3);
• – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
• – Australia RBA Gov Lowe Speaks at 14:20 (GMT+3);
• – US JOLTs Job Openings (m/m) at 17:00 (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.

By JustMarkets

At the closing of the stock market on Friday, the Dow Jones (US30) gained 0.80% (+0.87% for the week), and S&P 500 (US500) increased by 0.83% (+0.91% for the week). The NASDAQ Technology Index (US100) gained 0.69% (+1.44% for the week).

The Personal Consumption Price (PCE) Index, excluding food and energy, the Fed’s preferred measure of core inflation, was up 0.3% in March from the previous month. The PCE price data, especially with rising labor costs, support projections that Fed policymakers will raise the benchmark interest rate by another quarter percentage point at this week’s meeting. Fed officials and markets remain at odds over the future trajectory of interest rates, with the Central Bank expecting interest rates to remain at current levels through 2023, while investors are betting on lower rates by the end of the year. Given renewed signs of stress in the banking sector in recent days, as well as problems at First Republic Bank (FRC), Fed officials may signal a pause in June.

Equity markets in Europe traded flat on Friday. German DAX (DE30) gained 0.74% (+0.44% for the week), French CAC 40 (FR40) added 0.10% (-0.72% for the week), Spanish IBEX 35 (ES35) decreased by 0.79% (-1.52% for the week), British FTSE 100 (UK100) closed on Friday in the plus 0.50% (-0.55% for the week).

According to current prices, there is a 78% chance the ECB will raise interest rates by 25 bps this week. But much will depend on the inflation data coming out on Tuesday (CPI) and Wednesday (PPI). The main focus is on core CPI inflation. If this indicator shows signs of growth, the ECB might go back to the 0.5% step at the May meeting. But it should be noted that Eurozone GDP fell by 0.1% for the last quarter, indicating that high-interest rates are already starting to slow economic growth.

On Friday, the International Monetary Fund urged the ECB to keep raising interest rates until mid-2024 and European Union finance ministers to tighten fiscal policy as part of a concerted effort to reduce high inflation.

The Swiss National Bank (SNB) is demanding an overhaul of banking regulations after the collapse of Credit Suisse. Future regulations will force banks to hold sufficient assets that can be pledged as collateral so that existing liquidity facilities can be used. This would allow the central bank to provide the necessary liquidity without having to pass emergency legislation.

The World Bank yesterday published its latest Commodity Market Outlook report for 2023. Energy prices are projected to average $84 per barrel this year. Also, over the weekend, it became known that OPEC+ countries plan to reduce production levels further ahead of the summer to support black gold prices.

Asian markets traded flat last week. Japan’s Nikkei 225 (JP225) gained 0.78% over the week, China’s FTSE China A50 (CHA50) gained 2.22%, Hong Kong’s Hang Seng (HK50) ended the week down by 0.77%, India’s NIFTY 50 (IND50) jumped by 2.31%, and Australia’s S&P/ASX 200 (AU200) decreased by 0.73%.

The Bank of Japan forecasts a slowdown in inflation to 1.6% in fiscal year 2025 and said the risks to that price outlook have been shifted downward. The Bank of Japan (BOJ) kept interest rates ultra-low on Friday but announced a plan to review its past monetary policy moves.

China’s manufacturing activity unexpectedly declined in April, adding to problems for the economy in the midst of a mixed recovery from COVID-19 with sluggish global demand and a still fragile domestic real estate sector. The official manufacturing purchasing managers’ index (PMI) was 49.2, down from 51.9 in March. Taiwan’s economy plunged into recession after contracting at its fastest pace since the global financial crisis. The 3.02% drop is the sharpest since the end of the quarter in June 2009, highlighting the difficult outlook for the trade-dependent economy. Singapore’s core inflation, a key indicator tracked by the central bank, slowed for the first time since October.

In the commodities market, futures on sugar (+8.34%) and natural gas (+7.39%) showed the biggest gains last week. Futures on palladium (-6.49%), wheat (-5.87%), corn (-5.04%), platinum (-4.41%), lumber (-4.04%), and coffee (-2.98%) showed the biggest drops.

S&P 500 (F) (US500) 4,169.48 +34.13 (+0.83%)

Dow Jones (US30)34,098.16 +272.00 (+0.80%)

DAX (DE40) 15,922.38  +121.93 (+0.77%)

FTSE 100 (UK100) 7,870.57 +38.99 (+0.50%)

USD Index 101.67 +0.17 +0.17%

• – Japan Manufacturing PMI (m/m) at 01:00 (GMT+3);
• – Canada Manufacturing PMI (m/m) at 16:30 (GMT+3);
• – US ISM Manufacturing PMI (m/m) at 17:00 (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.