Global markets rebounded well overnight as fears over banking contagion after the demise of SVB and Signature bank dropped off in intensity and US CPI data came in on expectation. US stock markets experienced strong days with the Nasdaq closing the day nicely above the 2% mark, the S&P up 1.68% and the Dow 1.06% in the black. Global treasury yields also came back strongly with the bench mark 10-year US now sitting back around the 3.7% mark, although still well of last weeks highs. Currencies remained trading in relatively tight ranges.
Inflation in the US still has a long way to go before it is sitting anywhere near the Fed’s 2% target rate and investor focus is swiftly moving back to the FOMC meeting next week. Markets are now pricing in a near 80% chance of a 25bps hike and this now seems a safe halfway house for the Fed given the position they now find themselves in, stuck between the ‘rock’ of high inflation and the ‘hard place’ of a potential financial crisis.
Looking ahead to today’s trading sessions and investor concerns will remain high with any hint of further market turmoil leading to sharp corrections across the board. There is a raft of Chinese data due out in the Asian session and some tier 3 numbers out in Europe but once again the real action will come after the New York open. Today it is PPI and Retail Sales data in the US alongside the Empire State Manufacturing Index number, but expect any new headlines on the banking sector to supersede these in terms of market impact.
