Market Talk – March 27, 2023

ASIA:

Local governments in China are facing a debt crisis, with direct debt exceeding 120% of revenue, which is more than what Beijing has unofficially said is an acceptable debt level. The country’s explicit local government debt nearly doubled over five years to the equivalent of $5.14 trillion last year, and there are rapidly growing categories of related debt such as local government financing vehicles. The Chinese government has prioritized reducing financial risks, including in the real estate and local government debt sectors. In its annual government work report, the government dedicated an entire section to preventing and defusing major risks in these areas and called for preventing new debt build-up while reducing existing debt.

The major Asian stock markets had a mixed day today:

• NIKKEI 225 increased 91.62 points or 0.33 % to 27,476.87
• Shanghai decreased 14.26 points or -0.44% to 3,251.40
• Hang Seng decreased 347.99 points or -1.75% to 19,567.69
• ASX 200 increased 6.80 points or 0.10% to 6,962.00
• Kospi decreased 5.74 points or -0.24% to 2,409.22
• SENSEX increased 380.27 points or 0.66% to 57,907.37
• Nifty50 increased 40.65 points or 0.24% to 16,985.70

The major Asian currency markets had a mixed day today:

• AUDUSD increased 0.00026 or 0.04% to 0.66476
• NZDUSD decreased 0.00072 or -0.12% to 0.61938
• USDJPY increased 0.832 or 0.64% to 131.522
• USDCNY increased 0.01486 or 0.22% to 6.88366

Precious Metals:

• Gold decreased 20.07 USD/t oz. or -1.01% to 1,957.15
• Silver decreased 0.241 USD/t. oz or -1.04% to 22.981

Some economic news from last night:

China:

Chinese Industrial profit YTD (Feb) decreased from -4.0% to -22.9%

Japan:

Corporate Services Price Index (CSPI) (YoY) increased from 1.6% to 1.8%

Some economic news from today:

Japan:

Coincident Indicator (MoM) remain the same at -3.0%

Leading Index decreased from 97.2 to 96.6

Leading Index (MoM) decreased from -0.4% to -0.6%

Hong Kong:

Exports (MoM) (Feb) increased from -36.7% to -8.8%

Imports (MoM) (Feb) increased from -30.2% to -4.1%

Trade Balance decreased from -25.4B to -45.4B

EUROPE/EMEA:

Barclays has increased its forecast for the Bank of England’s benchmark policy rate to 4.5% following the central bank’s recent rate hike and unexpected rise in British inflation. The bank still expects another quarter-point hike in May and has raised its GDP forecast for the first three quarters of the year. Barclays now projects 100 basis points of cuts to the bank rate in the second half of next year and sees the rate ending at 3.5% next year.

The major Europe stock markets had a green day:

• CAC 40 increased 63.17 points or 0.90% to 7,078.27
• FTSE 100 increased 66.32 points or 0.90% to 7,471.77
• DAX 30 increased 170.45 points or 1.14% to 15,127.68

The major Europe currency markets had a mixed day today:

• EURUSD increased 0.0033 or 0.31% to 1.07920
• GBPUSD increased 0.0053 or 0.43% to 1.22830
• USDCHF decreased 0.00355 or -0.39% to 0.91635

Some economic news from Europe today:

France:

France Jobseekers Total decreased from 2,809.0K to 2,781.0K

Germany:

German Business Expectations (Mar) increased from 88.4 to 91.2

German Current Assessment (Mar) increased from 93.9 to 95.4

German Ifo Business Climate Index (Mar) increased from 91.1 to 93.3

US/AMERICAS:

Fed Governor Michael Barr will address two congressional panels this week to discuss the Silicon Valley Bank (SVB) failure. Barr believes the failure is a “textbook case of mismanagement.” He is blaming the failed back for not addressing problems soon enough, and “ironically, the overdue actions it finally took to strengthen its balance sheet sparked the uninsured depositor run that led to the bank’s failure.” The Federal Reserve is investigating the SVB collapse and plans to release its findings on May 1. The central bank will determine if stricter regulation could have prevented the collapse such as requiring banks to posses more liquidity and may change its ruling on how much long-term debt institutions may hold.

US Market Closings:

• Dow advanced 194.55 points or 0.6% to 32,432.08
• S&P 500 advanced 6.54 points or 0.16% to 3,977.53
• Nasdaq declined 55.12 points or -0.47% to 11,768.84
• Russell 2000 advanced 18.75 points or 1.08% to 1,753.67

Canada Market Closings:

• TSX Composite advanced 123.25 points or 0.63% to 19,624.74
• TSX 60 advanced 7.17 points or 0.61% to 1,178.83

Brazil Market Closing:

• Bovespa advanced 841.2 points or 0.85% to 99,670.47

ENERGY:

The oil markets had a mixed day today:

• Crude Oil increased 2.482 USD/BBL or 3.58% to 71.742
• Brent increased 2.491 USD/BBL or 3.32% to 77.481
• Natural gas decreased 0.138 USD/MMBtu or -6.23% to 2.0780
• Gasoline increased 0.0625 USD/GAL or 2.41% to 2.6510
• Heating oil increased 0.034 USD/GAL or 1.26% to 2.7292

The above data was collected around 12:42 EST on Monday

• Top commodity gainers: Crude Oil (3.58%), Brent (3.32%), Cotton (3.71%) and Lean Hogs (3.62%)
• Top commodity losers: Coffee (-1.45%), Lumber (-3.58%), Silver (-1.04%) and Natural Gas (-6.23%)

The above data was collected around 12:49 EST Monday.

BONDS:

Japan 0.305% (+1.9bp), US 2’s 3.97% (+0.189%), US 10’s 3.5091% (+13.11bps); US 30’s 3.73% (+0.087%), Bunds 2.236% (+11.1bp), France 2.766% (+10.6bp), Italy 4.079% (+6.3bp), Turkey 11.74% (-17bp), Greece 4.187% (+11.1bp), Portugal 3.123% (+10bp); Spain 3.286% (+9bp) and UK Gilts 3.383% (+10.2bp).

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