US equity markets bounced strongly in trading on Tuesday, with the S&P500 adding 64.80 points (+1.68%) to close at 3920.56. The gains were well spread across the market, with all sectors closing in the green led by the consumer services sector which rallied 2.75%. Of the constituents, approximately 84% of the 500 stocks closed the day higher. The Dow added 1.06%, while the Nasdaq100 surged 2.14%.
United States
The banking sector has started to show the impact of the Fed’s aggressive rate increases, with Signature Bank (SBNY) the latest bank to be closed by regulators. The bank began to see long queues forming outside its branches on Monday, after regulators announced setting up a “Signature Bridge Bank”, allowing depositors to withdraw their funds. SBNY had $110.36 billion in assets and $88.59 billion in deposits at the end of last year.
In response, the Fed convened an emergency closed-door meeting on Tuesday night while President Joe Biden made a special speech on the banking sector, declaring the banking sector to be “safe”. The president stated, “Americans can have confidence that the banking system is safe. Your deposits will be there when you need them”. Meanwhile, Apollo Global Management, Ares Management, Blackstone, Carlyle Group Inc., and KKR & Co are seeking to buy pieces in Silicon Valley Bank (SVB), while HSBC purchased the bank’s UK division.
In economic news, the rate of inflation showed signs of easing with the CPI matching expectations to 6% in February compared to 6.4% in January. Core inflation was in line with economists’ forecasts, slipping from 5.6% in January to 5.5% in February. Cooling inflation will be required to allow the Fed to pause on rates.
Europe
In Europe, the STOXX 600 closed 1.49% higher on Tuesday. Industrials, information technology, and consumer discretionary led the leader board to rise by 2.37%, 2.02%, and 1.79% respectively. The CAC jumped 1.86%, the DAX rose by 1.83% and the FTSE gained 1.17%. In economic news, the unemployment rate in the UK remained steady at 3.7%, below forecasts of 3.8%. The number of jobs added rose at a slower pace from 74k in January to 65k in February, higher than forecasts of 52k.
*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 higher this morning, with ASX futures up by 67 points or 0.96% to 7052. The ASX 200 fell by -1.41% on Tuesday amidst fears of a banking crisis in the US to close at 7008.9. The index experienced broad-based selling as investors sold stocks, to find safe havens in bonds, gold, and bitcoin. The biggest laggards were the information technology sector which sank by -3.44%, energy dropped by -2.78% and materials lost -1.60%. Computershare (CPU) plummeted -7.7% while Xero (XRO) declined -1.5%. Gold miners gained with Ramelius Resources (RMS) leading the gains surging 5.8%, Newcrest Mining (NCM) rising 3%, and Northern Star (NST) finishing 1.4% higher. The biggest underperformer of the index was Lake Resources (LKE), dropping -8.47% followed closely by Novonix (NVX) which fell by -8.46%. In the lithium sector, Allkem (AKE) lost -4.3% of its share value, while Pilbara Minerals (PLS) and IGO both shed more than 3.8%. In mining, Whitehaven Coal (WHC) shed -5.3% while New Hope (NHC) plunged -5.1%. In corporate news, PPK Group jumped 14% after announcing plans of acquiring lithium battery manufacturer PowerPlus energy. The yield on the 10-year Australian bond was 3.45% while the local currency firmed 0.2% against the greenback to 0.6681.
Commodities
The price of oil plummeted with WTI and Brent crude both declining by -4.53% and -4.04% to US$ 71.41 and US$ 77.51 respectively. In precious metals, spot gold was down -0.57% to US$ 1,902.66 while spot silver slipped by -0.74% to US$ 21.64. In industrial metals, copper lost -1.54% to US$ 401, nickel was up by 1.94% to US$ 22,927, while SGX Iron Ore jumped 2.14% to US$ 131.52. Meanwhile, the price of bitcoin rallied by 9% to US$ 25,544.
Economic Data
US: Fed Bowman Speech 8:20 am
CHN: Unemployment Rate (February) 1:00 pm
FRA: Inflation Rate Year-on-Year Final (February) 6:45 pm
EUR: Industrial Production Year-on-Year (January) 9:00 pm
US: PPI and Retail Sales Month-on-Month (February) 11:30 pm
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.
