Market movers today
It is a quiet day on the macro data front although the US Conference Board’s Consumer Confidence index will be released for March. Consensus is looking for a modest decline in line with the University of Michigan survey released earlier.
ECB’s Lagarde and BoE’s Bailey will give speeches today, while the Fed’s Barr testifies before the US Senate on bank oversight.
The National Bank of Hungary has a monetary policy meeting, consensus expects unchanged policy rate. In Sweden, FSA publishes its yearly Mortgage report (08:00 CET).
In Sweden, FSA publishes its yearly Mortgage report (08:00 CET).
The 60 second overview
Market recap: The beginning of the week has been characterised by relief in equity markets and a rebound in both nominal and real yields as markets have priced back in a higher likelihood of more global rate hikes to come. “No news is good news” remains the mantra for the European bank sector but general risk appetite was also aided by positive bank news on the other side of the Atlantic. Also the start to the week has been characterised by a weaker USD, a rise oil prices and a setback to indicators on global USD funding pressures.
First Citizens Bank. Yesterday, it was announced that First Citizens BankcShares has agreed to buy the majority of Silicon Valley Bank (SVB) assets which brings the acquirer to the top 15 list of the biggest US banks – up from a 30th spot by the end of 2022. The US Federal Deposit Insurance Corporation will still maintain a portion of SVB-assets. First Citizen stocks rose by more than 50% upon announcement. Adding to positive US banking news, Bloomberg reported over the weekend that the US authorities are contemplating expanding an emergency lending facility to struggling banks.
Central bank pricing. Following the improved risk appetite global yields moved higher yesterday with markets notably pricing in a higher likelihood of additional rate hikes from the Fed and the ECB. Markets are now pricing around 10bp worth of hikes from the Fed at the May meeting – yet the USD rate curve still embeds an accumulative 70bp worth of cuts by year-end. We still expect the Fed to hike policy rates by an additional 25bp in May and thereafter to keep policy rates unchanged until at least early 2024.
In terms of the ECB markets are now pricing around 45bp worth of additional hikes until summer and roughly 7bp worth of cuts by December. This remains more than 50bp worth of hikes short of our house call on the ECB although we humbly acknowledge that much will come down to credit growth indicators in the coming months as these will shed light on the full impact of recent bank jitters.
Israeli demonstrations. Following heavy demonstrations Israeli Prime Minister Benjamin Netanyahu has decided to delay a bill on political dominance in the appointment of judges. The bill has received heavy opposition which has brought Israel to a virtual standstill.
Hungary. Yesterday a majority of the Hungarian Parliament voted in favour of Finland joining NATO. The decision follows Turkey’s decision to approve Finland’s bid. Among political commentators Hungary’s previous opposition to a Finish membership was seen as an attempt to pressure the EU but also that this ratification is yet another sign that Prime Minister Victor Orbán is gradually turning his back to Moscow.
Equities: Global equities rose yesterday as the weekend had passed without any bank closure and just as importantly, it was a very quiet Monday from a bank news perspective. First Citiczens bought part of SVB, but that kind of news is in the positive camp as it strengthens the confidence around SVB being an idiosyncratic event. On top of this we got looser financial conditions, higher short-term yields, lover bond vol and banks together with value outperforming. In other words, Monday looked a bit like how we expect the coming months to be. In US Dow +0.6%, S&P 500 +0.2%, Nasdaq -0.5% and Russell 2000 +1.1%. Asian markets are mixed this morning while US and European futures are higher.
Credit: Yesterday, credit markets were relatively calm and traded slightly tighter with both CDS indices closing lower with iTraxx Main (-1.1bp) at 96.1bp, and iTraxx Crossover (-5.9bp) at 489.8bp. The primary Eurobond market is coming off to a busy start with 4 borrowers raising debt where Engie SA, Renault SA, Wolters Kluwer NV, and Canadian Imperial Bank of Commerce (Covered bond) were among the largest announced deals. Including the primary US market, 14 issuers were active, making the day the busiest since the SVB collapse. Bloomberg reports that borrowers are seeking funding based on declining volatility, lower rates, and are active in advance of first-quarter earnings blackouts.
FI: Global rates sold-off significantly in the absence of market moving news, which in light of the turmoil in recent weeks also means focus is turning back to the macro narrative. The sell-off was yet again driven by the front end, with 2y Germany 13bp higher on the day. German ASW spreads tightening from the start to 74bp, which is in the lower end in recent turmoil.
FX: It has been a fairly quiet start to the week for FX markets. Despite the relief risk-on sentiment in yesterday’s session it was still very limited to what extent the traditional risk-on currencies gained – some of which, like NOK, even ended the session among the underperformers. EUR/USD crept slightly higher to the 1.08 level but remains below the spot levels prior to Friday’s sell-off. Both EUR/SEK and EUR/GBP edged marginally lower while USD/JPY has moved back above the 131 mark on the rebound in yields.
