US equities posted modest gains on Friday with a rebound in major banks as well as assurances from regulators around financial stability improving sentiment.
United States
After initially weakening as much as 1% on Friday, the S&P500 posted a gain of 0.56% driven mostly by defensive sectors including health care 1.31%, consumer staples 1.63% and utilities 3.12%. The Dow Jones was also 0.41% higher along with the Nasdaq Composite 0.31% and Russell 2000 0.85% with the VIX 3.85% lower at 21.74. On Friday, US regulators said after a Financial Stability Oversight Council meeting that while some banks were under stress, the overall financial system remains sound. After last week’s turmoil surrounding Credit Suisse, Deutsche Bank was in focus on Friday with shares in the German lender slumping 8.53% in Germany as the cost of insuring against a default on the bank’s debt soared.
For now, financial markets suggest the Federal Reserve has reached peak interest rates, with no further hikes currently priced by markets, instead investors are expecting as many as 4 rate cuts by January 2024. Key data due out this week has the potential to change this pricing with PCE data for February out on Friday expected to show core prices were unchanged at 4.7% over the year while headline prices eased to 5.1% from 5.4% previously. Also in focus is the Conference Board’s consumer confidence survey for March overnight on Tuesday, along with the final reading of Q4 GDP on Thursday. Analysts expect the final reading to remain unchanged at 2.7% while looking ahead, the Atlanta Fed GDP nowcast suggests that the economy likely expanded at a 3.2% annualised rate over the first quarter of 2023. Based on estimates by economists, real GDP is expected to slow to 0.6% in the first quarter, before posting modest contractions in Q2 and Q3, which would meet the technical definition of a recession.
Atlanta Fed GDP Nowcast
Europe
European stocks were lower on Friday, weighed by the fall in Deutsche bank shares although many analysts at other investment banks called the move “irrational” while German Chancellor Olaf Scholz publicly backed the lender, noting it was a “very profitable bank”. The Euro Stoxx 600 was 1.37% lower along with the DAX -1.66%, CAC -1.74%, and FTSE100 -1.26% with major benchmarks across the region all lower. In focus for economic data this week is the release of the German Ifo Business Climate survey for March tonight, followed by German consumer confidence on Wednesday. Inflation data for the region will be in focus on Friday and expected to show core prices were little changed over the year to March at 5.7% while headline pressures are expected to have eased to 7.2% from 8.5%.
Deutsche Bank Shares
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
Australia
The ASX is expected to open flat this morning with ASX200 futures down just 0.04% too 6,980. The index posted a modest loss of 0.19% on Friday, as a 0.56% gain in materials helped to offset a 1.15% fall in financials. Shares in Block plunged 18.4% after short seller Hindenburg Research issued a report claiming the payments company facilitated fraud through the company’s Cash App. Elsewhere, Estia Health climbed 14.1% after receiving a $3 per share non-binding takeover offer from Bain Capital. In focus for the week ahead are retail sales for February on Tuesday expected to slow to 0.4% from 1.9% in January along with the monthly CPI estimate for February which is expected to show a modest easing of price pressures to 7.1% from 7.4% over the 12 months. ANZ Business Confidence and building permits are due out on Thursday, while housing credit data and Chinese PMI reports will be the main focus on Friday.
Commodities
Oil prices were lower on Friday with both WTI and Brent crude down 1.0% and 1.21% respectively to US$69.26 and US$74.99 a barrel. Base metals were mixed with aluminium up 0.47% along with nickel 4.22% and tin 1.98% while copper and zinc were 1.21% and 0.53% lower respectively. Iron ore futures in Singapore rose 1.23% on Friday although have mostly given up those gains this morning, trading 0.99% weaker at US$118.50. Gold retreated after approaching the US$2,000 an oz level, finishing 0.76% lower at US$1,978 while silver rose 0.53%.
Economic Data
Monday 27th March
German Ifo Business Climate (MoM Mar) 19:00
Tuesday 28th March
ECB Elderson Speech 01:40
ECB Schnabel Speech 02:00
BoE Bailey Speech 04:00
Fed Jefferson Speech 08:00
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3632.
