Risk Trades on as Bank Fears Drop
Risk trades got a shot in the arm overnight as fears of systemic issues in the banking system subsided with news in the US that First Citizen Bank has bought Silicon Valley Bank’s assets and the Fed is committed to ensuring all bank deposits are safe. Bank shares rallied nicely, however, the major US indices had unexceptional days, with the Dow closing up 0.6%, the S&P up 0.16%, and the Nasdaq finishing down 0.47%. The dollar drifted off against the majors but remained in familiar ranges, and Treasury yields gained ground once again.
Gold Focus
Global financial markets have experienced extreme volatility over the last few weeks, and Gold took off as bank contagion fears took a grip on investors and the shiny metal jumped from $1,800/oz to over $2,000/oz. Gold’s long-standing status as a safe haven asset came to the fore in the last couple of weeks, however, and traders are now poised for the next move after it has topped out on three separate occasions around the $2,000 level. Those expecting further market stress and turmoil will be looking for levels to buy, while those thinking that we are over the worst of the issues will be looking for levels to bail out or go short. Initial support is now around recent lows at $1,934, with longer-term support around $1,850 and resistance sitting firmly near the yearly high just under the $2,010 level.
Central Banker Chat to Dominate Today
We have had a fair amount of central bank chatter in the last couple of days after last week’s rate hikes, and there is set to be more in the sessions ahead. We’re due to hear from members of the Bank of Japan, the Bank of England, the ECB, the German Buba, as well as the Fed in the next trading session. Expect the overall message to be one of reassurance for the markets after the last few week’s uncertainty and volatility. It’s once again a relatively quiet day in terms of economic data, however, we do have the first tier-one number out of the US this week in the form of the CB Consumer Confidence release, forecast to print at 101.0.
