Stocks were up in the US on Tuesday, with the S&P500 closing back above the 4000 level at 4002.87, up 51.30 points (+1.30%) on the day. Utility stocks, which are typically seen as a ‘safe haven’ sold off (-1.93%), with money moving into energy and consumer discretionary stocks, with these sectors gaining 3.45% and 2.71% respectively. The Dow Jones Industrials rallied a little under 1%, while the Nasdaq100 added 1.42% to close at 12,741.44.
United States
Many of the regional banking stocks also bounced strongly, with First Republic Bank (FRC) jumping 29.47%, while KeyCorp (KEY) and Comerica (CMA) gained over 9% respectively. FRC has already received a US$30 billion deposit from 11 major banks last week, with reports JP Morgan is working to further boost the banks’ capital. In addition, U.S Treasury Secretary Janet Yellen pledged to help the banking sector further, saying in a speech to the American Bankers Association that the government has a ‘resolute commitment to take the necessary steps to ensure that depositors’ savings and the banking system remain safe’.
Traders and Investors are looking towards the FOMC meeting, which is scheduled for 5 am Sydney time on Thursday morning, where the Federal Reserve is expected to raise the Fed Funds rate by 25 basis points to 5.00%. With markets pricing in an 80% likelihood of this occurring, there are some who believe that the Fed may pause at current levels. The Fed is clearly caught between bringing down inflation which remains well elevated above their target and financial stability risks. Irrespective of what the FED does this month, the market is pricing 85 basis points of rate cuts by the end of the year. The VIX Index dropped sharply on Tuesday, declining 11.47% to close at 21.38, while the yield on the US 10-year bond rallied 12 basis points to 3.61%.
Europe
Stocks in Europe added good gains on Tuesday, with the Euro Stoxx 50 Index lifting 1.51% higher, led by a recovery in banking stocks, with the financials index gaining by 3.78%. The German Dax gained 1.75%, while the FTSE100 in the UK lifted 1.79% to close at 7,536.22.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
Australia
Locally, the Australian share market was higher on Tuesday, with the ASX200 Index gaining 56.88 points (+0.82%) to close at 6,955.39. ASX SPI200 futures are up an additional 62 points (+0.89%) in overnight trading to 7,048, suggesting a firmer start to our trading today. From Tuesday, New Hope Corp (NHC) was the top performing stock, gaining 8.57%, following a strong earnings release, whereby the company reported a 102% increase in profit to $668.6m for the six months through December. Other notable performers from the ASX200 were Dominoes Pizza (DMP, +5.57%), and AMP (AMP, +5.05%).
Commodities
Energy prices were higher on Tuesday, with WTI and Brent Crude Oil gaining by 2.50% and 1.78% respectively. Spot Gold prices sold off, closing at US41,940.07, after trading briefly above US$2,000 an oz on Monday. Industrial metals were mixed, with copper gaining 1.08%, while nickel prices shed 2.53%.
Economic Data
Wednesday 22nd March
Aust: Westpac Leading Index MoM (FEB) 11:00 am
UK: Inflation Rate (FEB), 6:00 pm
Euro: ECB President Lagarde Speech 7:45 pm
Thursday 23rd March
United States: FED Interest rate Decision, 5:00 am
United States: FED Press Conference, 5:30 am
This article was written by Oliver Gordon, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3632.
