Markets Bounce After Positive Bank News
Global markets bounced back on the first trading day of the week yesterday as investor confidence got a shot in the arm from the UBS – Credit Suisse shotgun merger and news in the US that NY Community Bank agreed to buy the deposit and loan book from Signature Bank. The major US indices all finished the day higher, the Dow up 1.2%, the S&P 0.9% and the Nasdaq lagging at 0.4% in the black. Traders removed some of the recent haven trades that had been put on with the dollar dropping against the majors and Gold falling swiftly off of highs after topping above $2,000.
Dollar Drops 0.5% As Optimism Returns
The US dollar took a hit across the board yesterday as traders started to see more of the Silver lining surrounding recent storm clouds of market turmoil. Cable led the way finishing the New York session up 0.87% with Euro just behind up 0.54%. The focus now turns to the FOMC meeting which concludes on Wednesday with some investors thinking that the Fed will skip any rate hike this month after the last weeks’ worth of huge market volatility. The market is now pricing in a 70% chance of a 25bps rate hike and that does appear the best option to allow the Fed to hedge its bets between the strong US data we have seen and the potential sharp downturn that some are predicting.
The Day Ahead
Markets have calmed over the last few hours as investors attempt to digest the plethora of information that has come their way out of the last few days trading. The economic data calendar starts in Ernest today as we gear up for three major central bank announcements later in the week. Expect Asian markets to have a bit more respite as Japan enjoys a public holiday, although Aussie traders will be watching the RBA’s Monetary Policy Meeting Minutes closely. The European session is also relatively bereft of data releases, but the focus will temporarily swing to Canada as the North American session opens and the latest CPI data comes out, 0.5% expected for the m/m number. However, once again, expect any major news on the banking sector to have a much more significant effect on market moves than data in the current environment.
