Market Talk – May 3, 2023

ASIA:

Core consumer inflation in the Japanese capital beat expectations in April and an index cutting fuel costs rose at its fastest pace in four decades, underscoring the challenge the central bank’s new chief faces in keeping interest rates ultra-low. The core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, rose 3.5% for Tokyo in April from a year earlier, government data showed on Friday, faster than the market’s average rise of 3. 2% and well above the 2% BOJ target. It accelerated from a 3.2% gain in March. Core CPI, which strips out fresh food and fuel costs, rose 3.8% in April from a year earlier, up from 3.4% in March, the data showed. The core-core index, which the BOJ watches closely to measure the trend of inflation, rose at its fastest annual rate since April 1982, when it rose 4.2%.

The major Asian stock markets had a negative day today:

•  NIKKEI 225 closed
•  Shanghai closed
•  Hang Seng decreased 234.65 points or -1.18% to 19,699.16
•  ASX 200 decreased 70.00 points or -0.96% to 7,197.40
•  Kospi decreased 22.99 points or -0.91% to 2,501.40
•  SENSEX decreased 161.41 points or -0.26% to 61,193.30
•  Nifty50 decreased 57.80 points or -0.32% to 18,089.85

The major Asian currency markets had a mixed day today:

•  AUDUSD increased 0.00092 or 0.14% to 0.66702
•  NZDUSD increased 0.00207 or 0.33% to 0.62277
•  USDJPY decreased 1.556 or -1.14% to 134.974
•  USDCNY decreased 0.00934 or -0.13% to 6.92436

Precious Metals:

Gold increased 18.59 USD/t oz. or 0.92% to 2,034.87

Silver increased 0.144 USD/t. oz or 0.57%% to 25.531

Some economic news from last night:

Australia:

Retail Sales (MoM) (Mar) increased from 0.2% to 0.4%

AIG Manufacturing Index (Apr) decreased from 5.6 to -20.2

New Zealand:

Unemployment Rate (Q1) remain the same at 3.4%

Employment Change (QoQ) (Q1) increased from 0.2% to 0.8%

Some economic news from today:

India:

Nikkei Services PMI (Apr) increased from 57.8 to 62.0

EUROPE/EMEA:

The European Commission is set to draw up a plan on Wednesday (May 3) to increase the capacity of Europe’s munitions industry to one million a year, EU officials said, as the bloc seeks to arm Ukraine and replenish its own stockpile. The European Commission is set to draw up a plan on Wednesday (May 3) to increase the capacity of Europe’s munitions industry to one million a year, EU officials said, as the bloc seeks to arm Ukraine and replenish its own stockpile. With its Ammunition Support Act (ASAP), the European Commission wants to incentivize the European defense industry to invest in expanding its production capacity, be it in supply chain components, machinery or personnel.

The major Europe stock markets had a green day today:

•  CAC 40 increased 20.63 points or 0.28% to 7,403.83
•  FTSE 100 increased 15.34 points, or 0.20% to 7,788.37
•  DAX 30 increased 88.12 points or 0.56% to 15,815.06

The major Europe currency markets had a mixed day today:

•  EURUSD increased 0.00545 or 0.50% to 1.10535
•  GBPUSD increased 0.00917 or 0.74% to 1.25557
•  USDCHF decreased 0.00723 or -0.81% to 0.88567

Some economic news from Europe today:

Euro Zone:

Unemployment Rate (Mar) decreased from 6.6% to 6.5%

US/AMERICAS:

The Federal Reserve unanimously agreed to raise interest rates by 25 bps, bringing the target range to 5%-5.25%. This is the tenth consecutive rate hike and rates have not been this high since August 2007. There are some signals that this could be the last rate hike after the official document removed wording that previously indicated additional tightening would be appropriate. However, Powell confirmed that no decision has been made on pausing rate hikes. Despite the recent banking failures, the FOMC said that the system remails “sound and resilient.” Tight credit conditions are a concern as American’s struggle with inflation. The central bank will also continue selling off Treasurys and mortgage-backed securities. However, the agency said they’re prepared to change their stance “if risks emerge that could impede the attainment of the Committee’s goals.”

Regional bank stocks fell sharply on Tuesday, with PacWest Bancorp’s shares falling more than 39% and Western Alliance’s shares dropping 20% during midday trading. The sharp declines extended losses in the sector from Monday, following the seizure of First Republic and its sale to JPMorgan Chase. First Republic reported a decline in deposits of about 40% during the first quarter, raising questions about how the bank could survive on its own. Most other regional banks reported smaller deposit declines, however, and some like PacWest reported that deposits began rebounding in late March. The recent bank failures and expected regulatory changes in the US banking sector have made the markets fragile.

US Market Closings:

• Dow declined 270.29 points or -0.8% to 33,414.24
• S&P 500 declined 28.83 points or -0.7% to 4,090.75
• Nasdaq declined 55.18 points or -0.46% to 12,025.33
• Russell 2000 advanced 7.17 points or 0.41% to 1,739.28

Canada Market Closings:

• TSX Composite declined 52.88 points or -0.26% to 20,354.68
• TSX 60 declined 3 points or -0.24% to 1,228

Brazil Market Closing:

• Bovespa declined 129.86 points or -0.13% to 101,797.09

ENERGY:

The oil markets had a negative day today:

•  Crude Oil decreased 3.605 USD/BBL or -5.03% to 68.055
•  Brent decreased 3.444 USD/BBL or -4.57% to 71.876
•  Natural gas decreased 0.0655 USD/MMBtu or -2.96% to 2.1485
•  Gasoline decreased 0.1291 USD/GAL or -5.30% to 2.3066
•  Heating oil decreased 0.0803 USD/GAL or -3.51% to 2.2089

The above data was collected around 16:06 EST on Wednesday.

Top commodity gainers: Wheat (4.81%), Orange Juice (1.29%), Oat (2.41%), and Cheese (3.32%)

Top commodity losers: Crude Oil (-5.03%), Gasoline (-5.30%), Milk (-10.10%), and Rhodium (-5.20%)

The above data was collected around 16:13 EST on Wednesday.

BONDS:

Japan 0.421%(+2bp), US 2’s 3.87% (-0.105%), US 10’s 3.3656%(-7.34bps); US 30’s 3.68% (-0.050%), Bunds 2.244% (-0.8bp), France 2.837% (-2.3bp), Italy 4.125% (-4.8bp), Turkey 12.60% (-31bp), Greece 4.098% (-14.8bp), Portugal 3.111% (-0.4bp), Spain 3.323% (-0.4bp) and UK Gilts 3.694% (+2.6bp).

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