GLOBAL CAPITAL MARKETS OVERVIEW, ANALYSIS & FORECASTS:

Author: Dr. Alexander APOSTOLOV (researcher at Economic Research Institute at BAS)

The Dow closed more than 190 points higher on Monday, while the S&P 500 rose nearly 0.2%, as sentiment improved after policymakers took steps and provided additional support for the struggling banking sector. Regional banks rose, with First Republic Bank up 12.1 percent, after news that U.S. authorities were considering expanding emergency credit lines for banks. Additionally, First Citizens announced an agreement to take over loans and deposits from Silicon Valley Bank from the FDIC. Meanwhile, the Nasdaq 100 fell about half a percent after rising U.S. Treasury yields kept investors away from technology and other high-growth stocks. Fed Barr is expected to testify before Senate lawmakers tomorrow, calling Silicon Valley Bank's failure a "textbook case of mismanagement" while acknowledging that the central bank's oversight may be flawed. 

The Canada S&P/TSX Composite rose 0.6% on Monday around 19,620, boosted by energy and banking stocks after First Citizen's takeover of Silicon Valley Bank inspired some confidence in the North American banking sector. The financial sector rose 0.7 percent, led by heavyweights TD Bank and BMO Bank, which rose 1.9 percent and 0.9 percent, respectively. The energy sector also increased, rising 2.1 percent, led by gains in crude oil prices. Meanwhile, unlike their Wall Street counterparts, Toronto's base metals stocks advanced 0.2 percent, while technology stocks rose 0.6 percent. Investors' eyes will be on the announcement of Canada's federal budget tomorrow.

The Baltic Sea Freight Exchange's main index, which measures the cost of shipping goods worldwide, fell about 2.2 percent to 1,456 points on Monday after two straight sessions of gains, weighed down by lower shipping rates for all segments on ships. The capesize index, which typically carries 150,000 tons of cargo such as iron ore and coal, fell about 4.6 percent to 1,795; and the panamax index, which tracks coal or grain cargoes of about 60,000 to 70,000 tonnes, fell about 0.5 percent to its lowest level since March 3 at 1,565. Among smaller ships, the supramax index lost 6 points to 1,326 points.

The ruble-based MOEX Russia index extended earlier gains to close at 2,440, up 2 percent on Monday, extending the previous week's 3 percent gain to a six-month high, with all major Moscow Exchange sectors giving broad support. Sanctions imposed by Western countries have isolated Russia's financial industry enough to avoid fears that global banking turmoil could spill over to Moscow. Still, investors continued to focus on the broader influence of European and U.S. financial institutions on commodity markets. Energy producers led gains, with oil prices retreating as traders assessed the outlook for oil and gas exports to Asia. Gazprom rose 1.75% as a Chinese delegation's visit to Moscow advanced contract talks on the Power of Siberia 2 pipeline, which would help Gazprom amid current low TTF prices and the destruction of the Nord Stream 1 pipeline. The rebound of the situation is crucial.

European shares rose on Monday, with the Stoxx 600 up 1.1%, led by auto and healthcare stocks. The Stoxx Bank Index rose 1.5%, with Deutsche bank up more than 6%, the best performer on Germany's DAX (up 1.4%). First Citizens BancShares Inc is in advanced talks to buy a Silicon Valley bank from the Federal Deposit Insurance Corporation. At the same time, the U.S. Financial Stability Oversight Board (US The Financial Stability Overvisor Council said on Friday that the U.S. banking system "is in danger." In Europe, EU leaders and the European Central Bank also said on Friday that EU lenders are well-capitalized and liquid and aim to restore confidence in Europe's banking sector. Meanwhile, the latest German IFO survey showed that business confidence in Europe's largest economy improved more than expected in March to its highest level in a year, largely driven by business expectations. The FTSE MIB rose 1.2% to close at 26,200 on Monday, recovering from Friday's steep losses and extending volatile momentum in European shares as investors continued to digest the stability of systemic banks. Lenders led gains as Deutsche Bank rallied sharply as analysts backed the bank's strength, in addition to First Citizens' takeover of collapsed Silicon Valley Bank. Finecobank topped the industry with a 2% gain. Utilities also rose sharply, with Italy's aluminum sector gaining 2.5 percent. The CAC 40 gained about 0.9 percent on Monday to close at 7,078, recouping some of Friday's losses as traders welcomed First Citizen's takeover of Silicon Valley Bank, which helped calm nerves in the global financial system. The sentiment was also supported by reports that U.S. authorities were considering extending emergency lending measures, giving regional banks more time to strengthen their balance sheets. Meanwhile, ECB officials continued to reiterate the soundness of the European banking sector. On the corporate front, Teleperformance (4%) was the top gainer, followed by Renault (+3%) after HSBC upgraded its view on the company to "buy" from "hold." BNP Paribas (+2.6%) and Eurofins Scientifique (+2.2%) gained steadily elsewhere. On the other hand, Pernod Ricard (-1.4%) and Kering (-1.2%) were the main draggers.

The Hongkong Hang Seng Index fell 347.99 points, or 1.75 percent, to 19,567.69 on Monday, extending losses from the previous session after the International Monetary Fund warned on Sunday of rising risks to global financial stability as the banking crisis deepened. Chief Executive Kristalina Georgieva also revealed that the world economy would grow by just 3% this year due to rising borrowing costs, the fallout from the war in Ukraine, and the trauma of the pandemic. Also, caution is growing ahead of data on March's Chinese manufacturing and service sector activity, due later this week. At the same time, the latest news shows that China's industrial profits fell by 22.9% year-on-year at the beginning. Still, the index pared sharp losses after the FDIC said that First Citizens Bank would buy Silicon Valley Bank for $72 billion today. The technology sector fell more than 3%, while the consumer, financial and real estate sectors fell 2.2%, 1.5%, and 1.1%, respectively. Travelsky Tech. plunged 7.4%, followed by Meituan (-6.4%), KE Holdings (-6.2%), and Fosun International (-4%).

The Japan Nikkei 225 rose 0.33% to close at 27,477, and the Topix gained 0.4% to close at 1,963 on Monday, tracking Wall Street's upbeat session on Friday. Still, as investors continued to assess recent banking turmoil and economic uncertainty, Affected by heightened sexuality, the market cautiously limited the gains. Minneapolis Fed President Neil Kashkari said over the weekend that the banking crisis had increased the risk of a U.S. recession. Investors also digested an upward revision in Japan's main economic indicators for January. As a result, Japanese stocks were mixed on Monday, with index heavyweights including Kawasaki Kisen (1.5%), Fast Retailing (1.2%), and Central Japan Railway (2.8%) gaining. Meanwhile, Tokyo Electron (-2.5%), Mitsubishi UFJ (-0.6%), and Japan Yusen (-0.5%) also saw notable declines.

China Shanghai Composite Index fell 0.6% to close at around 3,245 points, and the Shenzhen Stock Exchange constituent stocks fell 0.05% to close at 11,628 points. Mainland stocks have struggled to gain traction amid lingering concerns over a global banking crisis, heightened economic uncertainty, and U.S.-China tensions. Meanwhile, IMF Managing Director Kristalina Georgieva said in a speech at the 2023 China Development Forum over the weekend that China was showing signs of a strong economic recovery. Technology stocks led the decline, with Inspur Electronics (-4.6%), Foxconn Industry (-4%), United Nations Letter (-1.6%), Sugon Information (-3.2%), and Goertek (-1.5%) falling significantly.

The New Zealand ANZ 50 rose 32.05 points, or 0.28%, to 11,612.86 on Monday after early flat trade, supported by strong gains in U.S. stock futures following a report that First Citizens Bank would move from The FDIC buys deposits and loans from Silicon Valley Bank. Meanwhile, last week, Fed Chair Jerome Powell and Treasury Secretary Janet Yellen assured investors that the U.S. banking system remains stable. On top of that, the central bank raised interest rates by 25 basis points on March 22 but said it was on hold on further hikes as uncertainty in the banking sector deepened. Elsewhere, IMF Managing Director Kristalina Georgieva mentioned on Sunday that China's economy is experiencing a strong rebound this year when the global economic outlook remains challenging. Consumer services, consumer durables, and financials led gains, led by Restaurant Brands (3.1%), Hallenstein Glass (3%),

Australia S&P/ASX 200 rose 0.4% to around 6985 on Monday, recouping some of last week's losses, with nearly all sectors in the red. Meanwhile, investors remain cautious over recent banking turmoil in the U.S. and Europe and uncertainties in the global economy. Tech and healthcare stocks led gains, with Computershare (1.2%), Block Inc (2%), Xero (0.9%), Cochlar (0.9%"), and Sonic Healthcare (2.1%) up. Other index heavyweights also rose, including Origin Energy (2.5 percent), Charter Hall (2 percent) and ANZ Group (0.5 percent), Goodman Group (1.7 percent), and Qantas (1 percent). Meanwhile, commodity-related stocks were mostly lower, with Woodside Energy ( -2.2%), Pilbara Minerals (-2%), and Rio Tinto (-0.4%) falling.

Brazil's Ibovespa stock index closed 0.8 percent higher at around 99,650 on Monday after falling 3.3 percent the previous week. Investors awaited a possible unveiling of the domestic fiscal framework this week and were reassured by news of the bailout banks in the USA. Meanwhile, traders awaited the release of Copom's minutes tomorrow for clues on the outlook for interest rates after the hawkish tone from Brazil's central bank, which even signaled the possibility of raising interest rates "if necessary." Meanwhile, the central bank's weekly "Focus Survey" showed the inflation forecast for 2023 cut for the second week to 5.93% from 5.95%, while the forecast for Brazil's economic growth this year saw a slight increase to 0.90% from 0.88% a week ago. On the corporate front, Petro Rio (+4.8%), Raizen (+4.1%), and Braskem (+4.

 

REVIEWING THE LAST ECONOMIC DATA:

Reviewing the latest economic  news, the most critical data is:

- US: The Federal Reserve Bank of Dallas' general business activity index for manufacturing in Texas fell for the second straight month, from -11.5 in February to -15.7 in March 2023, indicating people's Perceptions of broader business conditions continued to deteriorate. The new orders index was negative for the tenth consecutive month (-14.3 vs. -11.2); orders continued to contract (-15.2 vs. -16.9), and the shipments index fell (-10.5 vs. -5). On the other hand, the production index, a key gauge of the state of the country's manufacturing sector, rose to 2.5 from -2.8, a reading that suggested a slight increase in output. In contrast, the capacity utilization index returned to positive territory, rising six points to 2.3. I

- FR: In February 2023, the number of people registered as unemployed in mainland France fell by 277,000 from the previous month to 2.781 million, the lowest level since September 2011, further evidence that European employment Markets remain tight. The number of unemployed people aged 25 to 49 fell by 157,000 to 1.621 million, while those 50 or older fell by 890,000 to 7.917 million. Meanwhile, the unemployment rate for those under 25 fell by 31,000 to 3.685 million. Compared with the same month of the previous year, the number of people registered as unemployed decreased by 1.702 million.

- UK: According to the latest quarterly distribution trade survey by the Confederation of British Industry, the retail sales balance in the United Kingdom's distribution trade survey fell from +2 in the previous month to +1 in March 2023, handily beating market expectations of -6, indicating retail sales It was largely unchanged for the second month in a row. Supplier orders were also largely unchanged, while inventories rose relative to expected sales. Sales are set to grow steadily next month, the first positive growth forecast since September 2022.

- HK: Hong Kong's imports fell 4.1% year-on-year to $331.6 billion in February 2023, the smallest decline in eight months, after falling 30.2% the previous month, the lowest level in 55 years. Purchases of most commodities increased, led by non-ferrous metals (154.9%), non-metallic mineral manufacturing (77.8%), and power generation machinery and equipment (72.3%). However, it was impacted by lower arrivals of electrical machinery, instrumentation (-21.7%), professional, scientific, and control instrumentation (-20.6%), and office machines and automatic data processing machines (-18.2%). Among the main suppliers, imports from South Korea (-49.1%) and Singapore (-34%) experienced the largest declines, while the largest increases in arrivals were from India (37.3%) and Vietnam (12.1%).

- HK: Hong Kong's exports fell 8.8% year-on-year for the tenth consecutive month in February 2023 to $286.2 billion, but that was the mildest decline since June 2022 and retreated from a seven-year low of 36.7% in January. Sales of five of the ten major commodities increased, mainly from non-ferrous metals (109.3%), power generation machinery and equipment (18.5%), and photographic equipment, equipment and supplies, optical products, and clocks and watches (8%). However, it was dragged down by declines in sales of professional, scientific, and control instrumentation (-36.3%), electrical machinery, instrumentation (-11.4%), and office machines and automatic data processing machines (-16.5%). Among major trading partners, exports to Japan experienced the largest decline (-23.1%), followed by India (-18.5%), Taiwan (-15.9%), and China (-12.7%). On the other hand, cargo volumes mainly increased to Macau (34.9%), as well as the United Arab Emirates (30.6%) and the Netherlands (30.3%).

- HK: Hong Kong's trade deficit widened to US$45.4 billion in February 2023 from US$32.1 billion a year earlier. Exports fell 8.8 percent to $286.2 billion for the tenth month, still weighed down by deteriorating external demand. The largest declines in sales were in professional, scientific, and control instrumentation (-36.3%) and in office machines and automatic data processing machines (-16.5%). Imports, meanwhile, also fell by 4.1 percent to $331.6 billion due to lower purchases of electrical machinery, instrumentation, and appliances (-21.7 percent) and scientific and control instrumentation (-20.6 percent). Consider that the country’s trade deficit increased to $71 billion in the first two months of this year, compared to a shortfall of $25.5 billion in the same period in 2022.

- AU: In February 2023, the M3 money supply in the euro area increased by 2.9% year-on-year to 16.1 trillion euros, lower than the 3.5% growth in the previous month and missing the market expectation of 3.2%. Growth in the M3 money supply was the slowest since October 2014 as the ECB further tightened monetary policy to combat high inflation.

- EU: In February 2023, household loans in the euro area increased by 3.2% year-on-year to 6.86 trillion euros, which eased from the previous month's growth of 3.6%, in line with market expectations. It was the slowest pace of growth in household lending since February 2021, as rising borrowing costs and high inflation hit consumer demand. In addition, business credit rose 5.7%, the slowest since April 2022. Credit to the private sector, including households and nonfinancial corporations, slowed to 4.3% in February, the slowest rate since December 2021.

- SW: Sweden's trade surplus widened significantly to SEK 6.9 billion in February 2023 from SEK 1 billion in the same period last year. Exports increased by 12% year-on-year to SEK 169.1 billion, with EU countries (15.8% at SEK 94.7 billion) and non-EU countries (7.5% at SEK 74.4 billion). At the same time, due to increased purchases from EU countries ( 11.1% to SEK 110 billion), imports rose by 8% to SEK 162.2 billion, while imports from non-EU countries fell (-0.9% to SEK 52.2 billion). Considering the first two months of the year, The country's trade surplus was SEK 15.4 billion, compared with a deficit of SEK 100 million in the same period in 2022.

- SW: In February 2023, the annual growth rate of Swedish household loans continued to slow to 2.8% from 3.2% in the previous month, which was the slowest pace since comparability began in 2006. Mortgage loans accounted for 83% of total household loans, while consumer loans accounted for 6%, up 2.4% year-over-year.

- TW: Taiwan's consumer confidence index rose to 62.47 in March 2023 from 62.47 in February. It was the highest reading since last May, as household sentiment strengthened across all indicators as the economy further recovered from the outbreak's disruptions: timing to buy durable goods (up 0.95 points to 109 from February), investment in stocks Timing (up 0.7 points to 24.7), job opportunities (up 2.6 points to 66), domestic economic outlook (up 2.05 points to 80.75), household economic outlook (up 2.3 points to 75.8) and consumer sentiment Price expectations for the next six months (up 3.4 points to 30.55).

- CN: In the first two months of 2023, the profits of Chinese industrial companies fell 22.9% year-on-year to 887.2 billion yuan as factory activity struggled to recover from the slump caused by the epidemic. Following a decline of 4.0% in 2022, profits of state-owned industrial enterprises fell sharply after rising last year (-17.5% vs. 3% in 2022), while private sector profits fell further (-19.9% vs. -7.2%). Profits fell in 28 of the 41 industries surveyed, namely computers and other electronic equipment (-77.1%), non-ferrous metal smelting and rolling (-57.2%), chemicals (-56.6%), automobiles ( -41.7%), non-metallic minerals (-39.2%), textiles (-37.1%), manufacturing (-8.9%), agriculture and food processing (-6.3%) and coal mining and washing (-2.3%).

 

LOOKING AHEAD:

Today, investors should watch out for the following important data:

- EUR: ECB President Lagarde Speaks, and German Buba President Nagel Speaks.

- GBP: BRC Shop Price Index y/y and BOE Gov Bailey Speaks.

- USD: FOMC Member Jefferson Speaks, Goods Trade Balance, Prelim Wholesale Inventories m/m

HPI m/m, S&P/CS Composite-20 HPI y/y, CB Consumer Confidence, Richmond Manufacturing Index, and FOMC Member Barr Speaks.

- JPY: BOJ Gov Kuroda Speaks, and BOJ Core CPI y/y.

- AUD: Retail Sales m/m.

- CA: Annual Budget Release.

 

KEY EQUITY & BOND MARKET DRIVERS:

Кey factors in the stock and bond market are currently:

- US: Stock futures contracts tied to the Dow rose 0.7% on Monday, while futures contracts tied to the S&P 500 and Nasdaq rose 0.8% and 0.5%, respectively, on news of additional support from U.S. authorities for the embattled banking industry provided some respite. First Republic surged more than 30% in premarket trading after Bloomberg reported that U.S. authorities were considering extending the bank's emergency credit line to give it more time to strengthen its balance sheet, pushing regional peers into the green. The acquisition of Silicon Valley Bank, which First Citizens BancShares said would buy SVB's loans and deposits, also helped ease concerns about the industry's stability. For the week, the Dow rose 1.2%, the S&P 500 rose 1.4%, and the tech-heavy Nasdaq Composite gained 1.7%.

- JP: The 10-year JGB yield was around 0.3 percent, close to levels seen in December when the Bank of Japan unexpectedly widened the upper limit of its yield curve control policy. Instability in the global financial system following the collapse of Credit Suisse and Silicon Valley Bank has prompted international investors to flee to the safety of government debt. Domestically, a summary of the Bank of Japan's opinion showed policymakers unanimously backing the central bank's ultra-loose monetary policy, delaying expectations of an eventual pivot. Meanwhile, the Diet of Japan has confirmed the appointment of Ueda as the new governor of the Bank of Japan from April 9. At an earlier hearing, Ueda backed the central bank's stance, saying the tightening policy was insufficient to tackle supply-driven inflation.

- CY: Yields on Chinese 10-year government bonds fell to 2.85% in late March, their lowest level in four months, in line with a broad decline in global bond yields amid concerns over the banking sector's health. Meanwhile, traders continued to price in a gloomy economic outlook as the country reopens. China's industrial profits fell 22.9 percent in the first two months of the year as market demand has yet to recover despite a rebound in industrial output fully. Meanwhile, Han Wenxiu, deputy director of the Communist Party's Finance and Economics Office, recently said that "the foundation of China's economic recovery is not yet solid enough." On the policy front, the People's Bank of China cut the reserve requirement ratio for financial institutions by 25 basis points in March, the first cut since December, to stimulate the economy.

- UK: The yield on UK 10-year gilts climbed back above 3.3% as investors breathed a sigh of relief after news that First Citizens BancShares had bought all deposits and loans from US Silicon Valley Bank. Still, yields remain well below the four-month high of 3.892% set on March 3, as the Bank of England is expected to turn dovish. British policymakers are likely to pause the current tightening cycle in May, while some analysts expect further rate hikes will be needed to combat stubbornly high inflation, and the central bank raised its outlook for the U.K. economy last week. On the data front, the latest CPI report showed that UK headline inflation unexpectedly accelerated to 10.4% in February, still well above the bank's 2% target.

- GE: German 10-year bond yields rose to 2.19% as concerns over the health of the global banking system eased, with investors betting the European Central Bank would raise rates again amid recent turmoil. First, Citizens Bank will acquire all loans and deposits of the bankrupt Silicon Valley Bank. Meanwhile, the ECB is widely expected to raise interest rates by another 25 basis points in May to combat stubbornly high inflation. Traders expect rates to peak around 3.4% in September, up from Friday's forecast of 8%. It peaked at 3.25% last month. Eurozone inflation figures for March are due on Friday. Headline year-on-year inflation is likely to ease to 7.2% from 8.5% in February, while core inflation is on track to hit a new record 5.7%.

- AU: Australia's 10-year government bond yield has fallen below 3.25%, the lowest level since early August, as investors adjusted their portfolios to brace for the health of the global financial system following the collapse of Credit Suisse and Silicon Valley banks. A possible pause in crunch. Officials softened their tone amid ongoing pressure on the banking sector, prompting traders to bet the Reserve Bank of Australia will stop raising interest rates next month. Meanwhile, at its March meeting, the central bank raised its cash rate by 25 basis points to 3.60%, the highest level over a decade.

 

LEADING MARKET SECTORS:

Strong sectors: Financials, Consumer Staples, Energy, Industrials, Materials.

Weak sectors: Communication Services, Information Technology, Real Estate.

 

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

Кey factors in the currency and commodities market are currently:

- CAD: The Canadian dollar was changing hands around $1.37, near a five-month low of $1.39 since March 9, betting that the Bank of Canada will turn to rate cuts after pausing tightening later this year. As widely expected, policymakers left their overnight rate target unchanged at 4.5 percent in March and are determined to keep it at current levels as long as the economy is broadly in line with expectations. On the dollar front, investors remained concerned that recent stress in the U.S. financial system could lead to a credit crunch, worsening growth prospects.

- GBP: Sterling traded at $1.22, just below a seven-week high of $1.234 hit on March 23, as investors rushed to safety amid worries about the global banking system and the risk of a U.S. recession. Global bank stocks tumbled last week after the sudden collapse of two U.S. banks and the rescue of troubled Credit Suisse. Meanwhile, investors welcomed the news that First Citizens BancShares Inc will buy all Silicon Valley Bank's deposits and loans from regulators. On the policy front, the Bank of England raised its key bank rate by 25 basis points to 4.25%, leaving the door open for further hikes if inflation persists. Recent data showed that UK inflation unexpectedly accelerated to 10.4% in February, well above the bank's 2% target. In the U.S., the Fed is expected to raise interest rates by 25 percentage points this year, and markets have priced in a nearly 90 percent chance the Fed will keep rates on hold in May and expect a rate cut in July.

- EUR: The euro hovered around $1.075, down from a seven-week high of $1.0929 on Wednesday, as investors sold riskier currencies on worries about global banking turmoil and recession. Credit Suisse had to secure "massive billions of dollars" from the Swiss National Bank to secure its liquidity. First Citizens BancShares Inc is in the early stages of buying Silicon Valley Bank Negotiations. It was a relief. Shares in Deutsche Bank tumbled on Friday as the cost of insuring its bonds against default rose sharply. On monetary policy, the ECB's Joachim Nagel said that if inflation develops as expected, this should not mark the end of the current ECB rate hike campaign. In the U.S., the Fed expects to cut interest rates to 5.1% by the end of 2023, implying another 25 percentage point rate hike before pausing the current tightening cycle, while the market sees the possibility of the Fed remaining unchanged in May and cutting rates in July Sex is close to 90%.

- NZD: The New Zealand dollar inched up 0.12% to $0.620 on Monday after falling 1% last week. The dollar's appeal has grown amid fears of a repeat of the systemic banking crisis that engulfed markets in 2008. However, market sentiment remained fragile amid concerns over a global credit crunch. Meanwhile, IMF Managing Director Kristalina Georgieva said on Sunday that 2023 would be another challenging year, with global growth slowing to below 3%, reflecting the Impact of pandemic disruption, war in Ukraine, and monetary tightening. She added that even with a better outlook for 2024, global GDP would remain below the historical average of 3.8%, and the overall outlook would remain weak. Domestically, New Zealand's GDP contracted surprisingly sharply in the fourth quarter of 2022, while the Reserve Bank of New Zealand continued to cool runaway inflation. The central bank has raised policy rates by 450 basis points in ten consecutive meetings, pushing the cash rate to a 41-year high of 4.75%.

- COT: Cotton futures traded around 79 cents a pound, not far from a near two-year low of 71.6 since late October, pressured by large inventories and the prospect of weaker demand amid recession fears. El Niño weather patterns are expected to boost yields in the second half of the year for US cotton farmers, who were forced to abandon much of their cropland in 2022 after one of the worst droughts in years. Meanwhile, in its March report, the US Department of Agriculture forecasted weaker global consumption due to reductions in Turkey, Pakistan, Indonesia, and Bangladesh. At the same time, the USDA raised forecasts for the US ending stocks for the 2022/23 crop year and raised the outlook for production thanks to higher production from China, Australia, and Uzbekistan, which more than offset lower output in India amid unfavorable weather.

- PLD: Palladium prices fell below $1,420 an ounce, nearing a near four-year low of $1,375 hit on March 8, as forecasts of weak demand offset signals of lower supply. Car sales in China shrank 20% year-on-year in the first two months of 2023. The decline was due to a sharp decline in sales of vehicles with internal combustion engines, which also caused lower demand for palladium, the key input material. Meanwhile, major commodity producer Norilsk Nickel showed that palladium output rose by a higher-than-expected 7% in 2022, prompting producers to fill stockpiles. Still, the company said planned plant maintenance would reduce production by 8% to 14% this year.

- CRN: Corn hovered around $6.4 a bushel, near a nearly one-month high of $6.45 hit on March 24, amid strong demand. The USDA's latest weekly export sales report showed corn sales hit a market-year high in the week ending March 16, up 23% from the previous week and 57% from the prior 4-week average, driven by purchases from China. Earlier this month, maize hit its lowest level since mid-August as the supply outlook for the grain improved after Brazil forecasted a record crop of 125.0 million tonnes and record exports of 52.0 million tonnes in 2022/23.Meanwhile, US corn supplies are likely to rise, with domestic corn ending stocks for the 2022/23 marketing year pegged at 1.342 billion bushels, compared with the government's February forecast of 1.267 billion bushels.

- TIN: Tin futures rallied toward the $25,000 per tonne mark, rebounding further from an almost four-month low of around $22,000 on March 16th, amid a potential pause in US interest rate hikes and an optimistic demand outlook from China after the economy reopened from its Covid-related restrictions. As the latest sign of China's economic activity pick-up, the country's manufacturing and services sectors grew sharply in February. On the supply side, Malaysia Smelting, one of the world's biggest tin producers, said it would increase its output by 20% over the next few years. In the longer term, demand for tin should benefit from the energy transition and green technologies, particularly solar panels, and EVs.

 

CHART OF THE DAY:

Gold edged down for the second session to under $1,970 an ounce on Monday after hitting a one-year high of above $2,000 last week, as government efforts to stabilize the banking system appeared to have soothed investors' anxiety for now. On Monday, the Federal Deposit Insurance Corporation said First Citizens BancShares Inc would acquire Silicon Valley Bank's deposits and loans. In Europe, Deutsche Bank shares rose more than 3% after the cost of insuring Deutsche Bank's debt against the risk of default surged to the highest on record on Friday. The price of gold is more than 7% higher this month, buoyed by safe-haven demand as the recent banking turmoil in the US and Europe raised fears of an economic recession.

 

 

 

 

Long-term Channels Trading Strategy for: Gold (XAUUSD)

Bank stocks leading upside charge after news of First Citizens BancShares (FCNCA) buyout of Silicon Valley Bank (SIVB); Treasury yields move higher, reflecting the change in sentiment in the market

GLOBAL CAPITAL MARKETS OVERVIEW, ANALYSIS & FORECASTS:

Author: Dr. Alexander APOSTOLOV (researcher at Economic Research Institute at BAS)

The Dow closed more than 190 points higher on Monday, while the S&P 500 rose nearly 0.2%, as sentiment improved after policymakers took steps and provided additional support for the struggling banking sector. Regional banks rose, with First Republic Bank up 12.1 percent, after news that U.S. authorities were considering expanding emergency credit lines for banks. Additionally, First Citizens announced an agreement to take over loans and deposits from Silicon Valley Bank from the FDIC. Meanwhile, the Nasdaq 100 fell about half a percent after rising U.S. Treasury yields kept investors away from technology and other high-growth stocks. Fed Barr is expected to testify before Senate lawmakers tomorrow, calling Silicon Valley Bank's failure a "textbook case of mismanagement" while acknowledging that the central bank's oversight may be flawed. 

The Canada S&P/TSX Composite rose 0.6% on Monday around 19,620, boosted by energy and banking stocks after First Citizen's takeover of Silicon Valley Bank inspired some confidence in the North American banking sector. The financial sector rose 0.7 percent, led by heavyweights TD Bank and BMO Bank, which rose 1.9 percent and 0.9 percent, respectively. The energy sector also increased, rising 2.1 percent, led by gains in crude oil prices. Meanwhile, unlike their Wall Street counterparts, Toronto's base metals stocks advanced 0.2 percent, while technology stocks rose 0.6 percent. Investors' eyes will be on the announcement of Canada's federal budget tomorrow.

The Baltic Sea Freight Exchange's main index, which measures the cost of shipping goods worldwide, fell about 2.2 percent to 1,456 points on Monday after two straight sessions of gains, weighed down by lower shipping rates for all segments on ships. The capesize index, which typically carries 150,000 tons of cargo such as iron ore and coal, fell about 4.6 percent to 1,795; and the panamax index, which tracks coal or grain cargoes of about 60,000 to 70,000 tonnes, fell about 0.5 percent to its lowest level since March 3 at 1,565. Among smaller ships, the supramax index lost 6 points to 1,326 points.

The ruble-based MOEX Russia index extended earlier gains to close at 2,440, up 2 percent on Monday, extending the previous week's 3 percent gain to a six-month high, with all major Moscow Exchange sectors giving broad support. Sanctions imposed by Western countries have isolated Russia's financial industry enough to avoid fears that global banking turmoil could spill over to Moscow. Still, investors continued to focus on the broader influence of European and U.S. financial institutions on commodity markets. Energy producers led gains, with oil prices retreating as traders assessed the outlook for oil and gas exports to Asia. Gazprom rose 1.75% as a Chinese delegation's visit to Moscow advanced contract talks on the Power of Siberia 2 pipeline, which would help Gazprom amid current low TTF prices and the destruction of the Nord Stream 1 pipeline. The rebound of the situation is crucial.

European shares rose on Monday, with the Stoxx 600 up 1.1%, led by auto and healthcare stocks. The Stoxx Bank Index rose 1.5%, with Deutsche bank up more than 6%, the best performer on Germany's DAX (up 1.4%). First Citizens BancShares Inc is in advanced talks to buy a Silicon Valley bank from the Federal Deposit Insurance Corporation. At the same time, the U.S. Financial Stability Oversight Board (US The Financial Stability Overvisor Council said on Friday that the U.S. banking system "is in danger." In Europe, EU leaders and the European Central Bank also said on Friday that EU lenders are well-capitalized and liquid and aim to restore confidence in Europe's banking sector. Meanwhile, the latest German IFO survey showed that business confidence in Europe's largest economy improved more than expected in March to its highest level in a year, largely driven by business expectations. The FTSE MIB rose 1.2% to close at 26,200 on Monday, recovering from Friday's steep losses and extending volatile momentum in European shares as investors continued to digest the stability of systemic banks. Lenders led gains as Deutsche Bank rallied sharply as analysts backed the bank's strength, in addition to First Citizens' takeover of collapsed Silicon Valley Bank. Finecobank topped the industry with a 2% gain. Utilities also rose sharply, with Italy's aluminum sector gaining 2.5 percent. The CAC 40 gained about 0.9 percent on Monday to close at 7,078, recouping some of Friday's losses as traders welcomed First Citizen's takeover of Silicon Valley Bank, which helped calm nerves in the global financial system. The sentiment was also supported by reports that U.S. authorities were considering extending emergency lending measures, giving regional banks more time to strengthen their balance sheets. Meanwhile, ECB officials continued to reiterate the soundness of the European banking sector. On the corporate front, Teleperformance (4%) was the top gainer, followed by Renault (+3%) after HSBC upgraded its view on the company to "buy" from "hold." BNP Paribas (+2.6%) and Eurofins Scientifique (+2.2%) gained steadily elsewhere. On the other hand, Pernod Ricard (-1.4%) and Kering (-1.2%) were the main draggers.

The Hongkong Hang Seng Index fell 347.99 points, or 1.75 percent, to 19,567.69 on Monday, extending losses from the previous session after the International Monetary Fund warned on Sunday of rising risks to global financial stability as the banking crisis deepened. Chief Executive Kristalina Georgieva also revealed that the world economy would grow by just 3% this year due to rising borrowing costs, the fallout from the war in Ukraine, and the trauma of the pandemic. Also, caution is growing ahead of data on March's Chinese manufacturing and service sector activity, due later this week. At the same time, the latest news shows that China's industrial profits fell by 22.9% year-on-year at the beginning. Still, the index pared sharp losses after the FDIC said that First Citizens Bank would buy Silicon Valley Bank for $72 billion today. The technology sector fell more than 3%, while the consumer, financial and real estate sectors fell 2.2%, 1.5%, and 1.1%, respectively. Travelsky Tech. plunged 7.4%, followed by Meituan (-6.4%), KE Holdings (-6.2%), and Fosun International (-4%).

The Japan Nikkei 225 rose 0.33% to close at 27,477, and the Topix gained 0.4% to close at 1,963 on Monday, tracking Wall Street's upbeat session on Friday. Still, as investors continued to assess recent banking turmoil and economic uncertainty, Affected by heightened sexuality, the market cautiously limited the gains. Minneapolis Fed President Neil Kashkari said over the weekend that the banking crisis had increased the risk of a U.S. recession. Investors also digested an upward revision in Japan's main economic indicators for January. As a result, Japanese stocks were mixed on Monday, with index heavyweights including Kawasaki Kisen (1.5%), Fast Retailing (1.2%), and Central Japan Railway (2.8%) gaining. Meanwhile, Tokyo Electron (-2.5%), Mitsubishi UFJ (-0.6%), and Japan Yusen (-0.5%) also saw notable declines.

China Shanghai Composite Index fell 0.6% to close at around 3,245 points, and the Shenzhen Stock Exchange constituent stocks fell 0.05% to close at 11,628 points. Mainland stocks have struggled to gain traction amid lingering concerns over a global banking crisis, heightened economic uncertainty, and U.S.-China tensions. Meanwhile, IMF Managing Director Kristalina Georgieva said in a speech at the 2023 China Development Forum over the weekend that China was showing signs of a strong economic recovery. Technology stocks led the decline, with Inspur Electronics (-4.6%), Foxconn Industry (-4%), United Nations Letter (-1.6%), Sugon Information (-3.2%), and Goertek (-1.5%) falling significantly.

The New Zealand ANZ 50 rose 32.05 points, or 0.28%, to 11,612.86 on Monday after early flat trade, supported by strong gains in U.S. stock futures following a report that First Citizens Bank would move from The FDIC buys deposits and loans from Silicon Valley Bank. Meanwhile, last week, Fed Chair Jerome Powell and Treasury Secretary Janet Yellen assured investors that the U.S. banking system remains stable. On top of that, the central bank raised interest rates by 25 basis points on March 22 but said it was on hold on further hikes as uncertainty in the banking sector deepened. Elsewhere, IMF Managing Director Kristalina Georgieva mentioned on Sunday that China's economy is experiencing a strong rebound this year when the global economic outlook remains challenging. Consumer services, consumer durables, and financials led gains, led by Restaurant Brands (3.1%), Hallenstein Glass (3%),

Australia S&P/ASX 200 rose 0.4% to around 6985 on Monday, recouping some of last week's losses, with nearly all sectors in the red. Meanwhile, investors remain cautious over recent banking turmoil in the U.S. and Europe and uncertainties in the global economy. Tech and healthcare stocks led gains, with Computershare (1.2%), Block Inc (2%), Xero (0.9%), Cochlar (0.9%"), and Sonic Healthcare (2.1%) up. Other index heavyweights also rose, including Origin Energy (2.5 percent), Charter Hall (2 percent) and ANZ Group (0.5 percent), Goodman Group (1.7 percent), and Qantas (1 percent). Meanwhile, commodity-related stocks were mostly lower, with Woodside Energy ( -2.2%), Pilbara Minerals (-2%), and Rio Tinto (-0.4%) falling.

Brazil's Ibovespa stock index closed 0.8 percent higher at around 99,650 on Monday after falling 3.3 percent the previous week. Investors awaited a possible unveiling of the domestic fiscal framework this week and were reassured by news of the bailout banks in the USA. Meanwhile, traders awaited the release of Copom's minutes tomorrow for clues on the outlook for interest rates after the hawkish tone from Brazil's central bank, which even signaled the possibility of raising interest rates "if necessary." Meanwhile, the central bank's weekly "Focus Survey" showed the inflation forecast for 2023 cut for the second week to 5.93% from 5.95%, while the forecast for Brazil's economic growth this year saw a slight increase to 0.90% from 0.88% a week ago. On the corporate front, Petro Rio (+4.8%), Raizen (+4.1%), and Braskem (+4.

 

REVIEWING THE LAST ECONOMIC DATA:

Reviewing the latest economic  news, the most critical data is:

- US: The Federal Reserve Bank of Dallas' general business activity index for manufacturing in Texas fell for the second straight month, from -11.5 in February to -15.7 in March 2023, indicating people's Perceptions of broader business conditions continued to deteriorate. The new orders index was negative for the tenth consecutive month (-14.3 vs. -11.2); orders continued to contract (-15.2 vs. -16.9), and the shipments index fell (-10.5 vs. -5). On the other hand, the production index, a key gauge of the state of the country's manufacturing sector, rose to 2.5 from -2.8, a reading that suggested a slight increase in output. In contrast, the capacity utilization index returned to positive territory, rising six points to 2.3. I

- FR: In February 2023, the number of people registered as unemployed in mainland France fell by 277,000 from the previous month to 2.781 million, the lowest level since September 2011, further evidence that European employment Markets remain tight. The number of unemployed people aged 25 to 49 fell by 157,000 to 1.621 million, while those 50 or older fell by 890,000 to 7.917 million. Meanwhile, the unemployment rate for those under 25 fell by 31,000 to 3.685 million. Compared with the same month of the previous year, the number of people registered as unemployed decreased by 1.702 million.

- UK: According to the latest quarterly distribution trade survey by the Confederation of British Industry, the retail sales balance in the United Kingdom's distribution trade survey fell from +2 in the previous month to +1 in March 2023, handily beating market expectations of -6, indicating retail sales It was largely unchanged for the second month in a row. Supplier orders were also largely unchanged, while inventories rose relative to expected sales. Sales are set to grow steadily next month, the first positive growth forecast since September 2022.

- HK: Hong Kong's imports fell 4.1% year-on-year to $331.6 billion in February 2023, the smallest decline in eight months, after falling 30.2% the previous month, the lowest level in 55 years. Purchases of most commodities increased, led by non-ferrous metals (154.9%), non-metallic mineral manufacturing (77.8%), and power generation machinery and equipment (72.3%). However, it was impacted by lower arrivals of electrical machinery, instrumentation (-21.7%), professional, scientific, and control instrumentation (-20.6%), and office machines and automatic data processing machines (-18.2%). Among the main suppliers, imports from South Korea (-49.1%) and Singapore (-34%) experienced the largest declines, while the largest increases in arrivals were from India (37.3%) and Vietnam (12.1%).

- HK: Hong Kong's exports fell 8.8% year-on-year for the tenth consecutive month in February 2023 to $286.2 billion, but that was the mildest decline since June 2022 and retreated from a seven-year low of 36.7% in January. Sales of five of the ten major commodities increased, mainly from non-ferrous metals (109.3%), power generation machinery and equipment (18.5%), and photographic equipment, equipment and supplies, optical products, and clocks and watches (8%). However, it was dragged down by declines in sales of professional, scientific, and control instrumentation (-36.3%), electrical machinery, instrumentation (-11.4%), and office machines and automatic data processing machines (-16.5%). Among major trading partners, exports to Japan experienced the largest decline (-23.1%), followed by India (-18.5%), Taiwan (-15.9%), and China (-12.7%). On the other hand, cargo volumes mainly increased to Macau (34.9%), as well as the United Arab Emirates (30.6%) and the Netherlands (30.3%).

- HK: Hong Kong's trade deficit widened to US$45.4 billion in February 2023 from US$32.1 billion a year earlier. Exports fell 8.8 percent to $286.2 billion for the tenth month, still weighed down by deteriorating external demand. The largest declines in sales were in professional, scientific, and control instrumentation (-36.3%) and in office machines and automatic data processing machines (-16.5%). Imports, meanwhile, also fell by 4.1 percent to $331.6 billion due to lower purchases of electrical machinery, instrumentation, and appliances (-21.7 percent) and scientific and control instrumentation (-20.6 percent). Consider that the country’s trade deficit increased to $71 billion in the first two months of this year, compared to a shortfall of $25.5 billion in the same period in 2022.

- AU: In February 2023, the M3 money supply in the euro area increased by 2.9% year-on-year to 16.1 trillion euros, lower than the 3.5% growth in the previous month and missing the market expectation of 3.2%. Growth in the M3 money supply was the slowest since October 2014 as the ECB further tightened monetary policy to combat high inflation.

- EU: In February 2023, household loans in the euro area increased by 3.2% year-on-year to 6.86 trillion euros, which eased from the previous month's growth of 3.6%, in line with market expectations. It was the slowest pace of growth in household lending since February 2021, as rising borrowing costs and high inflation hit consumer demand. In addition, business credit rose 5.7%, the slowest since April 2022. Credit to the private sector, including households and nonfinancial corporations, slowed to 4.3% in February, the slowest rate since December 2021.

- SW: Sweden's trade surplus widened significantly to SEK 6.9 billion in February 2023 from SEK 1 billion in the same period last year. Exports increased by 12% year-on-year to SEK 169.1 billion, with EU countries (15.8% at SEK 94.7 billion) and non-EU countries (7.5% at SEK 74.4 billion). At the same time, due to increased purchases from EU countries ( 11.1% to SEK 110 billion), imports rose by 8% to SEK 162.2 billion, while imports from non-EU countries fell (-0.9% to SEK 52.2 billion). Considering the first two months of the year, The country's trade surplus was SEK 15.4 billion, compared with a deficit of SEK 100 million in the same period in 2022.

- SW: In February 2023, the annual growth rate of Swedish household loans continued to slow to 2.8% from 3.2% in the previous month, which was the slowest pace since comparability began in 2006. Mortgage loans accounted for 83% of total household loans, while consumer loans accounted for 6%, up 2.4% year-over-year.

- TW: Taiwan's consumer confidence index rose to 62.47 in March 2023 from 62.47 in February. It was the highest reading since last May, as household sentiment strengthened across all indicators as the economy further recovered from the outbreak's disruptions: timing to buy durable goods (up 0.95 points to 109 from February), investment in stocks Timing (up 0.7 points to 24.7), job opportunities (up 2.6 points to 66), domestic economic outlook (up 2.05 points to 80.75), household economic outlook (up 2.3 points to 75.8) and consumer sentiment Price expectations for the next six months (up 3.4 points to 30.55).

- CN: In the first two months of 2023, the profits of Chinese industrial companies fell 22.9% year-on-year to 887.2 billion yuan as factory activity struggled to recover from the slump caused by the epidemic. Following a decline of 4.0% in 2022, profits of state-owned industrial enterprises fell sharply after rising last year (-17.5% vs. 3% in 2022), while private sector profits fell further (-19.9% vs. -7.2%). Profits fell in 28 of the 41 industries surveyed, namely computers and other electronic equipment (-77.1%), non-ferrous metal smelting and rolling (-57.2%), chemicals (-56.6%), automobiles ( -41.7%), non-metallic minerals (-39.2%), textiles (-37.1%), manufacturing (-8.9%), agriculture and food processing (-6.3%) and coal mining and washing (-2.3%).

 

LOOKING AHEAD:

Today, investors should watch out for the following important data:

- EUR: ECB President Lagarde Speaks, and German Buba President Nagel Speaks.

- GBP: BRC Shop Price Index y/y and BOE Gov Bailey Speaks.

- USD: FOMC Member Jefferson Speaks, Goods Trade Balance, Prelim Wholesale Inventories m/m

HPI m/m, S&P/CS Composite-20 HPI y/y, CB Consumer Confidence, Richmond Manufacturing Index, and FOMC Member Barr Speaks.

- JPY: BOJ Gov Kuroda Speaks, and BOJ Core CPI y/y.

- AUD: Retail Sales m/m.

- CA: Annual Budget Release.

 

KEY EQUITY & BOND MARKET DRIVERS:

Кey factors in the stock and bond market are currently:

- US: Stock futures contracts tied to the Dow rose 0.7% on Monday, while futures contracts tied to the S&P 500 and Nasdaq rose 0.8% and 0.5%, respectively, on news of additional support from U.S. authorities for the embattled banking industry provided some respite. First Republic surged more than 30% in premarket trading after Bloomberg reported that U.S. authorities were considering extending the bank's emergency credit line to give it more time to strengthen its balance sheet, pushing regional peers into the green. The acquisition of Silicon Valley Bank, which First Citizens BancShares said would buy SVB's loans and deposits, also helped ease concerns about the industry's stability. For the week, the Dow rose 1.2%, the S&P 500 rose 1.4%, and the tech-heavy Nasdaq Composite gained 1.7%.

- JP: The 10-year JGB yield was around 0.3 percent, close to levels seen in December when the Bank of Japan unexpectedly widened the upper limit of its yield curve control policy. Instability in the global financial system following the collapse of Credit Suisse and Silicon Valley Bank has prompted international investors to flee to the safety of government debt. Domestically, a summary of the Bank of Japan's opinion showed policymakers unanimously backing the central bank's ultra-loose monetary policy, delaying expectations of an eventual pivot. Meanwhile, the Diet of Japan has confirmed the appointment of Ueda as the new governor of the Bank of Japan from April 9. At an earlier hearing, Ueda backed the central bank's stance, saying the tightening policy was insufficient to tackle supply-driven inflation.

- CY: Yields on Chinese 10-year government bonds fell to 2.85% in late March, their lowest level in four months, in line with a broad decline in global bond yields amid concerns over the banking sector's health. Meanwhile, traders continued to price in a gloomy economic outlook as the country reopens. China's industrial profits fell 22.9 percent in the first two months of the year as market demand has yet to recover despite a rebound in industrial output fully. Meanwhile, Han Wenxiu, deputy director of the Communist Party's Finance and Economics Office, recently said that "the foundation of China's economic recovery is not yet solid enough." On the policy front, the People's Bank of China cut the reserve requirement ratio for financial institutions by 25 basis points in March, the first cut since December, to stimulate the economy.

- UK: The yield on UK 10-year gilts climbed back above 3.3% as investors breathed a sigh of relief after news that First Citizens BancShares had bought all deposits and loans from US Silicon Valley Bank. Still, yields remain well below the four-month high of 3.892% set on March 3, as the Bank of England is expected to turn dovish. British policymakers are likely to pause the current tightening cycle in May, while some analysts expect further rate hikes will be needed to combat stubbornly high inflation, and the central bank raised its outlook for the U.K. economy last week. On the data front, the latest CPI report showed that UK headline inflation unexpectedly accelerated to 10.4% in February, still well above the bank's 2% target.

- GE: German 10-year bond yields rose to 2.19% as concerns over the health of the global banking system eased, with investors betting the European Central Bank would raise rates again amid recent turmoil. First, Citizens Bank will acquire all loans and deposits of the bankrupt Silicon Valley Bank. Meanwhile, the ECB is widely expected to raise interest rates by another 25 basis points in May to combat stubbornly high inflation. Traders expect rates to peak around 3.4% in September, up from Friday's forecast of 8%. It peaked at 3.25% last month. Eurozone inflation figures for March are due on Friday. Headline year-on-year inflation is likely to ease to 7.2% from 8.5% in February, while core inflation is on track to hit a new record 5.7%.

- AU: Australia's 10-year government bond yield has fallen below 3.25%, the lowest level since early August, as investors adjusted their portfolios to brace for the health of the global financial system following the collapse of Credit Suisse and Silicon Valley banks. A possible pause in crunch. Officials softened their tone amid ongoing pressure on the banking sector, prompting traders to bet the Reserve Bank of Australia will stop raising interest rates next month. Meanwhile, at its March meeting, the central bank raised its cash rate by 25 basis points to 3.60%, the highest level over a decade.

 

LEADING MARKET SECTORS:

Strong sectors: Financials, Consumer Staples, Energy, Industrials, Materials.

Weak sectors: Communication Services, Information Technology, Real Estate.

 

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

Кey factors in the currency and commodities market are currently:

- CAD: The Canadian dollar was changing hands around $1.37, near a five-month low of $1.39 since March 9, betting that the Bank of Canada will turn to rate cuts after pausing tightening later this year. As widely expected, policymakers left their overnight rate target unchanged at 4.5 percent in March and are determined to keep it at current levels as long as the economy is broadly in line with expectations. On the dollar front, investors remained concerned that recent stress in the U.S. financial system could lead to a credit crunch, worsening growth prospects.

- GBP: Sterling traded at $1.22, just below a seven-week high of $1.234 hit on March 23, as investors rushed to safety amid worries about the global banking system and the risk of a U.S. recession. Global bank stocks tumbled last week after the sudden collapse of two U.S. banks and the rescue of troubled Credit Suisse. Meanwhile, investors welcomed the news that First Citizens BancShares Inc will buy all Silicon Valley Bank's deposits and loans from regulators. On the policy front, the Bank of England raised its key bank rate by 25 basis points to 4.25%, leaving the door open for further hikes if inflation persists. Recent data showed that UK inflation unexpectedly accelerated to 10.4% in February, well above the bank's 2% target. In the U.S., the Fed is expected to raise interest rates by 25 percentage points this year, and markets have priced in a nearly 90 percent chance the Fed will keep rates on hold in May and expect a rate cut in July.

- EUR: The euro hovered around $1.075, down from a seven-week high of $1.0929 on Wednesday, as investors sold riskier currencies on worries about global banking turmoil and recession. Credit Suisse had to secure "massive billions of dollars" from the Swiss National Bank to secure its liquidity. First Citizens BancShares Inc is in the early stages of buying Silicon Valley Bank Negotiations. It was a relief. Shares in Deutsche Bank tumbled on Friday as the cost of insuring its bonds against default rose sharply. On monetary policy, the ECB's Joachim Nagel said that if inflation develops as expected, this should not mark the end of the current ECB rate hike campaign. In the U.S., the Fed expects to cut interest rates to 5.1% by the end of 2023, implying another 25 percentage point rate hike before pausing the current tightening cycle, while the market sees the possibility of the Fed remaining unchanged in May and cutting rates in July Sex is close to 90%.

- NZD: The New Zealand dollar inched up 0.12% to $0.620 on Monday after falling 1% last week. The dollar's appeal has grown amid fears of a repeat of the systemic banking crisis that engulfed markets in 2008. However, market sentiment remained fragile amid concerns over a global credit crunch. Meanwhile, IMF Managing Director Kristalina Georgieva said on Sunday that 2023 would be another challenging year, with global growth slowing to below 3%, reflecting the Impact of pandemic disruption, war in Ukraine, and monetary tightening. She added that even with a better outlook for 2024, global GDP would remain below the historical average of 3.8%, and the overall outlook would remain weak. Domestically, New Zealand's GDP contracted surprisingly sharply in the fourth quarter of 2022, while the Reserve Bank of New Zealand continued to cool runaway inflation. The central bank has raised policy rates by 450 basis points in ten consecutive meetings, pushing the cash rate to a 41-year high of 4.75%.

- COT: Cotton futures traded around 79 cents a pound, not far from a near two-year low of 71.6 since late October, pressured by large inventories and the prospect of weaker demand amid recession fears. El Niño weather patterns are expected to boost yields in the second half of the year for US cotton farmers, who were forced to abandon much of their cropland in 2022 after one of the worst droughts in years. Meanwhile, in its March report, the US Department of Agriculture forecasted weaker global consumption due to reductions in Turkey, Pakistan, Indonesia, and Bangladesh. At the same time, the USDA raised forecasts for the US ending stocks for the 2022/23 crop year and raised the outlook for production thanks to higher production from China, Australia, and Uzbekistan, which more than offset lower output in India amid unfavorable weather.

- PLD: Palladium prices fell below $1,420 an ounce, nearing a near four-year low of $1,375 hit on March 8, as forecasts of weak demand offset signals of lower supply. Car sales in China shrank 20% year-on-year in the first two months of 2023. The decline was due to a sharp decline in sales of vehicles with internal combustion engines, which also caused lower demand for palladium, the key input material. Meanwhile, major commodity producer Norilsk Nickel showed that palladium output rose by a higher-than-expected 7% in 2022, prompting producers to fill stockpiles. Still, the company said planned plant maintenance would reduce production by 8% to 14% this year.

- CRN: Corn hovered around $6.4 a bushel, near a nearly one-month high of $6.45 hit on March 24, amid strong demand. The USDA's latest weekly export sales report showed corn sales hit a market-year high in the week ending March 16, up 23% from the previous week and 57% from the prior 4-week average, driven by purchases from China. Earlier this month, maize hit its lowest level since mid-August as the supply outlook for the grain improved after Brazil forecasted a record crop of 125.0 million tonnes and record exports of 52.0 million tonnes in 2022/23.Meanwhile, US corn supplies are likely to rise, with domestic corn ending stocks for the 2022/23 marketing year pegged at 1.342 billion bushels, compared with the government's February forecast of 1.267 billion bushels.

- TIN: Tin futures rallied toward the $25,000 per tonne mark, rebounding further from an almost four-month low of around $22,000 on March 16th, amid a potential pause in US interest rate hikes and an optimistic demand outlook from China after the economy reopened from its Covid-related restrictions. As the latest sign of China's economic activity pick-up, the country's manufacturing and services sectors grew sharply in February. On the supply side, Malaysia Smelting, one of the world's biggest tin producers, said it would increase its output by 20% over the next few years. In the longer term, demand for tin should benefit from the energy transition and green technologies, particularly solar panels, and EVs.

 

CHART OF THE DAY:

Gold edged down for the second session to under $1,970 an ounce on Monday after hitting a one-year high of above $2,000 last week, as government efforts to stabilize the banking system appeared to have soothed investors' anxiety for now. On Monday, the Federal Deposit Insurance Corporation said First Citizens BancShares Inc would acquire Silicon Valley Bank's deposits and loans. In Europe, Deutsche Bank shares rose more than 3% after the cost of insuring Deutsche Bank's debt against the risk of default surged to the highest on record on Friday. The price of gold is more than 7% higher this month, buoyed by safe-haven demand as the recent banking turmoil in the US and Europe raised fears of an economic recession.

 

 

 

 

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