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Futures Rally Fizzles As Banking Fears Resurface

futures-rally-fizzles-as-banking-fears-resurface

Futures Rally Fizzles As Banking Fears Resurface

US index futures are fractionally higher, led by tech, however continued turmoil surrounding First Republic Bank which tumbled as much as 30% this morning after losing half its value yesterday, has sapped much of the earlier optimism and gains. Yesterday was the SPX’s worst day in a month and was April’s second move that exceeded 1%, in either direction. As of 8:00am ET, S&P futures were up 0.1%, while Nasdaq futures gained 0.8%, but both were well of their highs. Google parent Alphabet and Microsoft Corp. both beat first-quarter earnings expectations in results published after the market close. Microsoft gained in the premarket Wednesday, while Alphabet reversed an advance to move into the red. Meta Platforms is due to report after the bell today.

Pre-mkt MSFT +7.4%, AMZN +3.7%, NVDA +2.1%, META +2.0%, GOOGL, +0.5%, AAPL +0.4%. PACW seemingly gives more evidence that FRC is idiosyncratic. V is +0.9% pre-mkt after posting earnings; the more impactful news may be that the company states that the consumer remains in good shape amid decreasing inflation. Here are some other notable premarket movers:

  • Boeing shares jump 4.1% in premarket trading, after the planemaker’s first-quarter revenue and cash flow both beat expectations.  Shares off some Boeing suppliers also rose premarket. Spirit AeroSystems up 2.5%, Arconic up 1%, Howmet up 1.9%.
  • Microsoft jumps as much as 7.7% after the software company’s third-quarter results beat expectations. Analysts highlighted strength in the company’s Azure cloud business and were optimistic about the overall resiliency of the business, leading at least 16 of them to raise their price target on the stock.
  • Alphabet rises as much as 1.9% after the Google parent reported first-quarter results that beat expectations. Analysts noted strength in the company’s search business, as well as positive momentum in cloud. This coupled with strong results from fellow tech juggernaut Microsoft eased concerns that tech shares’ year-to-date rally is overdone.
  • Midsize US banks, including First Republic (FRC US), rally following an update from peer PacWest which showed that deposits stabilized toward the end of March and rose in April, calming worries over the lender’s health.
  • Enphase Energy shares plummet as much as 16%, on track for their worst day since June 2020, with analysts cutting their price targets on the solar equipment maker after its second-quarter revenue guidance missed expectations due to weakness in its US market and higher interest rates. Brokers say that Enphase’s first quarter performance was overall strong, and are positive regarding its prospects for the longer-term.
  • Getty falls as much as 6.7% after the media firm rebuffed a takeover bid of almost $4 billion from Trillium, saying the activist investor hasn’t provided any evidence that its proposal, valuing the shares at nearly double the pre-offer price, is “sufficiently credible.”
  • IonQ gains 3.6% after Morgan Stanley initiates coverage with an equal-weight recommendation, saying the quantum computing company is an early leader in the space, though the technology risk is high as quantum advantage is still unproven.

While layoffs dominate headlines, the US is still net adding jobs this year, from a strong starting point, 3.5% unemployment. The yield curve is steeper with USD lower; cmdtys staging a relief rally.

Today, the macro data focus is on durable/cap goods, inventories, and mtge applications. There may be a vote on McCarthy’s debt ceiling bill in the House, though this bill will fail in the Senate but is seeing a stronger negotiating move. Debt ceiling fears will continue to permeate markets near-term

“The question is to what extent central banks and regulators can contain market sentiment and make clear to investors they need to keep a cool head, to give depositors confidence that there is no need to run to other banks,” said Tatjana Puhan, deputy chief investment officer at Tobam SAS. “So far the Fed has been very clear that they will continue to hike rates as long as needed to contain inflation.”

European stocks fall to their lowest level in two weeks as investors continue to fret over the health of the global banking system. Software producer Dassault Systemes sank more than 8% after missing revenue estimates. The Stoxx 600 is down 0.8% with industrials, healthcare and tech the worst performing sectors. Bank stocks were leading declines at one stage but recovered after a positive premarket open for First Republic. Dutch chip-tool maker ASM International slumped more than 10% after offering a tepid outlook for the rest of the year. Roche Holding AG retreated even as its first-quarter sales exceeded expectations. Beats from Standard Chartered Plc and Sweden’s SEB AB failed to bolster sentiment. Here are the most notable European movers:

  • Kindred shares jump 15% after the online gambling firm said it initiated a review of strategic alternatives, including a sale. Goodbody analyst says the firm is an “attractive asset”
  • Temenos shares jump as much as 11%, the most in a year, after the Swiss financial software firm delivered a strong beat in the first quarter, even if its outlook remains clouded
  • Persimmon shares gain as much as 5.3% after showing an improving outlook in its 1Q report, with other UK homebuilders also gaining. Peel Hunt says the report offers “comfort”
  • SSAB rallies as much as 5.2% after reporting adjusted Ebitda for the first quarter that beat estimates, with analysts expecting the Swedish steelmaker’s estimates to rise
  • SEB shares rise by as much as 6.2%, the most in a year, after the Swedish lender reported net interest income for the first quarter that beat the average analyst estimate
  • Vonovia rises 5.9% after it sells minority common equity participation in “Suedewo” portfolio to Apollo on behalf of its affiliated and third party insurance clients and other investor
  • ASM International shares fall as much as 13% in Amsterdam, their biggest intraday decline since 2020, after the Dutch chip-tool maker offered a tepid outlook for rest of the year
  • Dassault Systemes shares fall as much as 7.8%, their biggest intraday decline since May 2022, after the French firm reported weaker-than-expected software license sales for 1Q
  • CRH shares drop as much as 5% after the Irish building materials company reported 1Q like-for-like sales growth below that of peers, impacted by weather effects
  • Axfood falls as much as 6.5% after the Swedish grocer reported 1Q adjusted Ebitda and net sales slightly below expectations, a miss Kepler Cheuvreux attributes to logistics arm Dagab
  • Handelsbanken falls as much as 4.4% after its CET1 ratio missed the consensus, while Citi noted that a small beat in net interest income was driven by a reclassification of funding costs

“The markets are very much focused on some of the earnings story, but possibly overlooking the weight of economic deceleration that is playing through right now, particularly in the United States,” John Woods, Asia Pacific chief investment officer at Credit Suisse Group AG, said on Bloomberg Television. “I’m looking at a whole range of technical signals, which seem to be suggesting a risk-off environment.”

Earlier in the session, Asia stocks fell for a fourth straight day as weak US consumer confidence data sapped risk appetite, although the selloff in Chinese equities paused. The MSCI Asia Pacific Index slipped as much as 0.5%, trading near a one-month low, led by benchmarks in Japan and the Philippines. The moves come after declines in US markets overnight amid a drop in consumer confidence and a re-emergence of banking concerns.  Hong Kong shares outperformed with gains, while mainland China equities trimmed earlier losses as traders sought catalysts after the rout this month. China’s high frequency indicators show the economy continued to expand in April, though geopolitical concerns are keeping optimism in check.

“The macro overlay is probably dominating the performance of equities, particularly in China,” said John Woods, Asia Pacific chief investment officer at Credit Suisse, told Bloomberg Television. “I’m looking at a whole range of technical signals which seem to be suggesting a risk-off environment” globally, he added. Despite strong results from Microsoft and Alphabet, a gauge of major tech stocks in the region was among the biggest sectoral decliners Wednesday. Earnings are front and center this week, with more than 800 members of the MSCI Asia gauge scheduled to report, as the market attempts to find direction amid low volatility. 

Japanese stocks fell amid renewed concern over the health of the global banking system after First Republic Bank shares plunged on a proposed asset sale and decline in deposits. The Topix fell 0.9% to close at 2,023.90, while the Nikkei declined 0.7% to 28,416.47. Keyence contributed the most to the Topix decline, decreasing 2%. Out of 2,158 stocks in Topix, 329 rose and 1,767 fell, while 62 were unchanged. “I think it is unlikely that the problem of US banks will develop into a financial crisis,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management. “However, there is a possibility that lending will tighten mainly for small and medium-sized companies, and attention must be paid to the risk of economic deterioration.”

Australian stocks were flat, as cooler inflation boosted the case for holding rates; the S&P/ASX 200 index was little changed to close at 7,316.30, as losses in mining shares offset gains in industrials and energy stocks. Australia’s core inflation decelerated in the first three months of 2023, lending weight to the Reserve Bank’s view that prices will steadily come down and supporting the case for it to extend an interest-rate pause. Read: Australia’s Cooler Inflation Boosts Case to Keep Rates on Hold In New Zealand, the S&P/NZX 50 index fell 0.8% to 11,934.98.

In FX, the Bloomberg Dollar Spot Index fell 0.3%, unwinding most of Tuesday’s gain, as US futures rose. Euro and pound outperform among G10 currencies, with both climbing more than 0.5% against the greenback. Australia’s dollar dropped against all its major peers as the country’s slower-than-estimated inflation supported the case for the central bank to extend its rate-hike pause. The trimmed-mean inflation gauge rose 1.2% in 1Q from the previous quarter, falling short of the 1.4% gain estimated by economists; it comes after the Reserve Bank of Australia paused its almost year-long tightening cycle earlier this month. The Swedish krona also dropped after the Riksbank signaled smaller rate increases going forward.

In rates, treasuries held on to Tuesday’s sharp gains following minimal price action during Asia session and London morning. US yields are 1bp lower on the day with 10-year around 3.39%, trailing bunds by 4bp in the sector. European bonds also gained, with German and UK 10-year yields falling by 5bps and 2bps respectively.  The treasury auction cycle continues with $43b 5-year note sale at 1pm, following small tail in Tuesday’s 2-year sale. WI 5-year yield at ~3.43% is ~23bp richer than March auction, which stopped 1bp through the WI level.

Crude futures advance with WTI rising 0.5% to trade near $77.50. Spot gold is little changed around $2,000.

Bitcoin is firmer and has lifted back towards the USD 29k mark, but is yet to mount a convincing test of the figure with the high thus far circa. USD 100 shy; action which keeps BTC comfortably above last-week’s parameters but shy of the USD 30k+ seen earlier in April.

Looking to the day ahead now, and data releases from the US include preliminary durable goods orders and core capital goods orders for March. From central banks, we’ll hear from ECB Vice President de Guindos and the ECB’s Herodotou. Lastly, earnings releases include Meta and Boeing.

Market Snapshot

  • S&P 500 futures up 0.1% to 4,098.00
  • MXAP down 0.1% to 159.64
  • MXAPJ up 0.2% to 510.57
  • Nikkei down 0.7% to 28,416.47
  • Topix down 0.9% to 2,023.90
  • Hang Seng Index up 0.7% to 19,757.27
  • Shanghai Composite little changed at 3,264.10
  • Sensex up 0.1% to 60,210.93
  • Australia S&P/ASX 200 little changed at 7,316.30
  • Kospi down 0.2% to 2,484.83
  • STOXX Europe 600 down 0.7% to 463.89
  • German 10Y yield little changed at 2.35%
  • Euro up 0.6% to $1.1037
  • Brent Futures up 0.5% to $81.17/bbl
  • Gold spot up to $1,997.49
  • U.S. Dollar Index down 0.43% to 101.43

Top Overnight News

  • BOJ widely expected to leave policy unchanged this week, but COVID could be dropped in the statement as a risk factor, a move that might be interpreted as the first step toward tightening measures later in the year. RTRS
  • Australian inflation eased from 33-year highs in the first quarter as the cost of living saw the smallest rise in more than a year, while core inflation dipped below forecasts suggesting less pressure for another hike in interest rates. Data from the Australian Bureau of Statistics on Wednesday showed the consumer price index (CPI) rose 1.4% in the March quarter, just above market forecasts of 1.3% but the smallest increase since late 2021. RTRS
  • South Korea will have a say in planning a potential U.S. nuclear response to a North Korean attack in return for not developing its own nuclear weapons. WSJ
  • Sweden’s Riksbank raises rates by 50bp, as expected (although two members at the bank voted for 25bp), and guided for one additional increase at its June or Sept meeting, suggesting the tightening process is nearly over. BBG
  • The White House chief of staff, Jeff Zients, said that while he can’t comment on specific banks, “you can be reassured that that the regulators are deeply involved in monitoring the situation and will take the necessary actions”. WSJ
  • Almost one in five cars sold worldwide this year will be an electric vehicle, the International Energy Agency has forecast, after sales already passed the 10mn mark for the first time globally. The remarkable surge in demand for battery-powered models means electric vehicles will account for 18 per cent of global car sales compared with just 4 per cent of global car sales in 2020, according to the agency’s annual outlook. FT
  • Opposition mounts in the House among Republicans to McCarthy’s debt ceiling bill, meaning it prob. can’t pass without revisions (the goal had been for a vote to take place today). The Hill  
  • US crude stockpiles slumped more than 6 million barrels last week, the API is said to have reported. That would be the biggest drop in four weeks if confirmed by the EIA today. Inventories at Cushing edged higher. Gasoline supplies resumed their decline, while distillate inventory climbed. BBG
  • Stanley Druckenmiller is betting against the US dollar as his only high-conviction trade in what he believes is the most uncertain environment for markets and the global economy in his 45-year career. FT
  • The SPAC boom took hundreds of risky companies to the stock market. The next stop for many is bankruptcy court. Dozens of companies that merged with SPACs are running out of cash, joining at least 12 that have already gone bankrupt after combining with special-purpose acquisition companies. WSJ

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly lower after the losses on Wall St where banking sector fears resurfaced as First Republic Bank shares fell by 50% due to an exodus of deposits and with the lender considering up to USD 100bln in asset sales, although US equity futures found some reprieve overnight from the big tech earnings. ASX 200 was lacklustre but with downside stemmed as participants digested somewhat mixed inflation data in which the headline CPI readings for Q1 topped forecasts, but all other components were softer than expected and supported the view that the economy has passed peak inflation. Nikkei 225 declined amid pressure in the banking sector and disappointment in Japan after the failed lunar module landing which resulted in a glut of sell orders for ispace shares. Hang Seng and Shanghai Comp were mixed with early weakness in tech after US Republican senators urged for US government measures to address Chinese cloud companies including placing sanctions on Huawei Cloud and adding Alibaba Cloud to the export control list, although it was also reported that China’s State Council pledged to expand the export and import scale of key products and will properly respond to unreasonable foreign trade restrictions.

Top Asian News

  • RBNZ proposed to ease LVR restriction from June 1st and it assessed that risks to financial stability from high-LVR lending have reduced to a level where current restriction may be unnecessarily reducing efficiency, according to Reuters.
  • Japanese panel is reportedly reviewing utility prices to look for a lower hike, according to NTV.

European bourses are lower across the board, Euro Stoxx 50 -0.6%, with pressure emanating from the softer APAC handover which itself was impacted by FRC-induced banking concern with European names impacted. More recently, earnings from heavyweights Safran and ASM International are weighing on the Industrial Goods and Tech sectors respectively. For reference, after the European cash open broader sentiment slipped to fresh lows with bourses posting downside in excess of 1.0%; though, this magnitude was somewhat shortlived and occurred without a fresh catalyst at the time. Stateside, US futures are somewhat mixed with ES marginally firmer but relatively contained while the NQ +1.3% is the standout outperformer after well-received Big Tech after-market updates ahead of the likes of Meta and Boeing on Wednesday. Alphabet Inc (GOOGL) – Top- and bottom-line beats, Q1 EPS 1.17 (exp. 1.07), Q1 Revenue 69.8bln (exp. 68.9bln), a USD 70bln share buyback, and decent ad revenue saw GOOG rise over 1.5% in afterhours trading. +1.1% in pre-market trade Microsoft Corp (MSFT) – Rose over 8% in afterhours trading following top and bottom-line beats on cloud growth. Q3 EPS 2.45 (exp. 2.23), Q3 revenue USD 52.9bln (exp. 51.02bln), Q3 Cloud revenue 28.5bln (exp. 28.19bln). +7.9% in pre-market trade

Top European News

  • Riksbank hikes its Rate by 50bps to 3.50% as expected; Dissent from Bremen and Floden (3-2 vote split); forecast indicates a 25bps hike in June or September; peak rate seen at 3.65% (prev. 3.33%), Q2-2026 average 3.35%; reiterates language on SEK.. Click here for details, reaction and newsquawk analysis.
  • ECB’s Vujcic commented that there is no choice but to raise rates further, according to Delo.
  • German Economy Ministry says industrial electricity pricing concept is to be introduced next week.
  • EU Commission proposes that countries with a budget gap larger than 3% of GDP will have to cut the deficit by at least 0.5% of GDP annually, until they are below the 3% ceiling. In-fitting with earlier FT reports.

FX

  • Swedish Krona crushed after ‘dovish’ 50bp Riksbank hike as 2 doves dissent, guidance suggests 1/4 point rise next time and repo path shows cut by Q2 2026, EUR/SEK eyes April high near 11.4500.
  • DXY recoils within 101.890-320 range to the benefit of Euro and Pound especially, EUR/USD tops 1.1050 and pulls away from multiple option expiries, Cable reclaims 21 DMA on the way to towards 1.2500.
  • Aussie continues to underperform as mostly softer than consensus inflation data underscores the probability of another RBA pause, AUD/USD probes 0.6600.
  • Yen extends recovery rally vs Buck on spot month end amidst broad risk aversion and pre-BoJ positioning, USD/JPY towards the base of a 133.40-86 range.
  • PBoC set USD/CNY mid-point at 6.9237 vs exp. 6.9250 (prev. 6.8847)

Fixed Income

  • Core benchmarks are mixed and in relative proximity to the unchanged mark, though retain an upward bias, as Bunds/Gilts faded from their initial 135.75 and 102.12 respective peaks.
  • The morning’s dual-issuance via Germany sparked little reaction given the pullback from above best by around 40 ticks to near neutral had already occurred.
  • Stateside, USTs are similarly contained though the benchmark contrasts slightly in being softer on the session in limited 115.18-25 parameters ahead of supply and data, with yields big as such and action as has been the case recently more evident at the short-end of the curve.

Commodities

  • WTI and Brent June futures eked mild gains overnight but trimmed those gains in early European hours in what has been a choppy morning for the complex.
  • Spot gold continues to trade indecisively as the yellow metal balances a softer Dollar with the deteriorating risk profile across the market.
  • Base metals meanwhile are mostly firmer, benefiting from the pullback in the Dollar, but with upside capped as the risk tone remains cautious.
  • Russian Deputy PM Novak says total balance of oil supply and demand has not changed; says OPEC+ is effective, there are risks to energy security without OPEC+; says OPEC+ are not regulating prices.
  • US Energy Inventory Data (bbls): Crude -6.1mln (exp. -1.5mln), Gasoline -1.9mln (exp. -0.9mln), Distillate 1.7mln (exp. -0.8mln), Cushing 0.5mln.
  • European Commission VP Sefcovic said 80 companies signed up to the EU’s platform for joint natgas purchases that launched on Tuesday, according to FT.

Geopolitics

  • Russia said two of its strategic missile carrier bombers flew over the Barents and Norwegian seas, according to Reuters.
  • Drone reportedly fell on the grounds of Moscow City court, according to Izvestia newspaper; drone did not carry any objects.
  • China and Russia signed a memorandum of understanding on maritime law enforcement cooperation, according to Chinese state media.
  • China’s Defence Ministry says they are willing to work with the Pakistani military to further deepen and expand practical cooperation.
  • China Maritime Administration said China will conduct live firing drills in the East China Sea today, according to Reuters.
  • China Taiwan Affairs Office commented on a recent media report that an EU diplomat called for EU navy patrols in the Taiwan Strait in which it stated that authorities will be prepared and they will be on high alert for possible harm to China’s national sovereignty and territory, according to Reuters.
  • Turkish President Erdogan cancelled election campaign rallies on Wednesday on his Doctors suggestion amid an unexpected health issue.

US Event Calendar

  • 07:00: April MBA Mortgage Applications +3.7%, prior -8.8%
  • 08:30: March Durable Goods Orders, est. 0.7%, prior -1.0%; Durables Less Transportation, est. -0.2%, prior -0.1%
    • March Cap Goods Ship Nondef Ex Air, est. 0.1%, prior -0.1%
    • March Cap Goods Orders Nondef Ex Air, est. -0.1%, prior -0.1%
  • 08:30: March Retail Inventories MoM, est. 0.2%, prior 0.8%
  • 08:30: March Wholesale Inventories MoM, est. 0.1%, prior 0.1%
  • 08:30: March Advance Goods Trade Balance, est. -$90b, prior -$91.6b

DB’s Jim Reid concludes the overnight wrap

If I’m not thinking straight this morning forgive me as my brain was disturbed by an awful noise last night that I can’t get out of my head. Yes my 5-yr old twins came home from school yesterday after their first ever violin lesson and insisted on giving me a rendition. I’d imagine torture is easier to endure.

The noises from the market over the last 24 hours haven’t been pleasant either with the S&P 500 (-1.58%) experiencing its worst day in over a month. The slump had several drivers, including weak earnings reports, poor data releases, continued fears around the debt ceiling, and even a renewed bout of concern about the banking sector. Taken together, that’s cast increasing doubt on the sustainability of the rally over recent weeks, with investors once again pricing in a growing chance of rate cuts later this year. More positive tech earnings after the US bell were the one bright spot and are boosting US futures in Asia.

We’ll start with the banking concerns, as one of the biggest stories yesterday was the latest slump in First Republic Bank (-49.37%), which was the worst performer in the entire S&P 500. That follows their earnings release after the close on Monday, which was always going to be a focal point of the week. It showed a bigger-than-expected decline in deposits and saw them announce a workforce reduction of around 20-25% in Q2. Additionally, yesterday it was reported that the lender was looking to divest $50-100bn of long-dated mortgages and securities that are underwater in order to clean up their balance sheet. According to reports, First Republic could offer incentives such as warrants or preferred equity to buyers in order to move the assets. This highlights how vital it appears to them to shed those assets and how little others might want them. The news brought on a further bout of selling, with shares down -29% before the asset sale news and then dropping a further -25% in the hour or so after the news broke.

The latest fall in the share price takes it down to an all-time low ($8.10), and well below the 12-16 share price range of the last month where things had stabilised. It was at around $147 in early February. The losses were evident among banks more broadly, with all but one of the 22 members of the KBW Banks Index (-3.45%) losing ground.

Those declines among bank stocks were at the forefront of a broader equity sell-off as earnings season continues apace. After the close yesterday, we heard from Microsoft (+8.64% after-market, -2.25% yesterday) and Alphabet (+1.68% after-market, -2.03% yesterday). They both reported above consensus revenues and EPS, with the latter also announcing an additional $70bn share buyback program. Alphabet’s ad-sales grew enough to quell some concerns there, while Microsoft’s strong cloud services demand bolstered sentiment after the close. Earlier in the day, UPS (-9.99%) struggled after they warned that their revenue for the year would be at the lower end of their forecast range from January. In the meantime, McDonald’s (-0.58%) outperformed the broader market as it beat estimates and is generally a defensive stock, whilst General Motors (-4.02%) was another that struggled after reporting. Today we get Meta and Boeing leading the way.

An additional factor not helping matters yesterday was weak US data. It’s true that some housing measures surprised on the upside, but they were more backward looking for February and March. By contrast, the Conference Board’s consumer confidence reading for April fell back to 101.3 (vs. 104.0 expected), and the expectations component hit a 9-month low at 68.1. In turn, the weak data plus the latest banking woes led investors to price in further rate cuts for this year, with the futures-implied rate for December down by -13.0bps on the day to 4.355%. That is the biggest move lower on the December rate projection in over three weeks. Markets are pricing in a 79% chance of a 25bp hike next week, with just a 9% chance of a hike in the following meeting.

This negative mood music meant that sovereign bonds rallied across the board, and 10yr US Treasuries (-9.1bps) saw their biggest daily decline in over a month, taking them down to 3.3996%. Early in the US session the 1m3m yield curve steepened to near its highs from last week, trading at around 165bps as fears about a potential debt ceiling crisis mount. However, by the end of the session, investors had flipped positioning and the curve flattened -37.4bps to close at 111.9bps. That is the flattest the curve has been since last Monday. See my CoTD here from yesterday for more on that topic.

Back in Europe, there was also a serious decline in sovereign bond yields, with those on 10yr bunds (-12.4bps), OATs (-12.0bps) and BTPs (-10.4bps) all moving lower. The shifts were in line with the broader risk-off move, as we didn’t much new info on the way of ECB policy. We did hear from Chief Economist Lane who gave an interview to Le Monde, but he only said that “we should raise rates again”, rather than offering any clue on the size of a potential hike. For equities there was a similarly downbeat tone, and the STOXX 600 fell back -0.40%.

Overnight in Asia, stocks are trying to shake off the banking system worries following upbeat results from US big tech so far. Chief among the decliners is the Nikkei (-0.72%) amid a more defensive price action away from financials. The Shanghai Composite (-0.31%) and the Kospi (-0.14%) are also in the red. The picture is brighter for Hong Kong indices, with the Hang Seng (+0.53%) rebounding amid robust gains in tech (Hang Seng TECH is up by +1.22% so far). Tailwinds to the sector are coming from the aforementioned US big tech results, with Nasdaq 100 (+1.27%) and the S&P 500 (+0.42%) futures both gaining this morning. Otherwise, both US Treasuries and the dollar are steady.

On the political side, US President Biden formally announced yesterday that he would be standing for re-election in 2024, calling on voters to back him so he could “finish this job”. The announcement ends any speculation about whether Biden would in fact run for re-election, and will also enable him to raise funds for the campaign. There was also confirmation that Vice President Kamala Harris will remain as his running mate, and the pair do not face any serious opposition from inside their party for the nomination. On the Republican side, former President Trump remains the polling front-runner, and recent polls this month have shown him expanding his lead over Florida Governor Ron DeSantis, who hasn’t yet announced a candidacy. Incidentally, if Biden and Trump were the respective nominees for 2024, it would be the first time that the same two nominees have faced each other in a direct re-match since 1956.

Looking at yesterday’s other data, US new home sales rose by more than expected in March, up to an annualised rate of 683k (vs. 632k expected), marking their highest level in a year. We also had the FHFA house price index for February, which showed growth at a 9-month high of +0.5% (vs. -0.1% expected).

To the day ahead now, and data releases from the US include preliminary durable goods orders and core capital goods orders for March. From central banks, we’ll hear from ECB Vice President de Guindos and the ECB’s Herodotou. Lastly, earnings releases include Meta and Boeing.

Tyler Durden
Wed, 04/26/2023 – 08:07

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