There are at least 4 points to monitor in today’s market day: what investors observe and what can happen in a financial context besieged by various reasons of uncertainty.
Today’s markets are punctuated by at least 4 facts, statements, data that could guide investors’ choices.
The spotlights have been on for weeks now on hot topics: the stability of the financial system, the solidity of US banks and more - with the uncertainties for stock market investors - the next moves by the ECB and the Fed, the fight against inflation, the sudden spike in oil prices.
In this context, there are at least 4 crucial points to monitor.
1. Credit Suisse bailed out of bankruptcy?
If Credit Suisse Group had not been sold to UBS Group, it would have defaulted on the next trading day, causing a global financial crisis, according to Swiss National Bank Vice President Martin Schlegel.
Had the government-brokered takeover not materialized, “it is very, very likely that a financial crisis would have occurred in Switzerland and around the world”, Schlegel told broadcaster SRF in an interview aired on Monday. “CS would then have gone into bankruptcy”. With the merger agreed - the best of bad solutions - financial stability concerns won’t stop the SNB from raising interest rates, he added.
2. 50 point rate hike from the ECB?
ECB Governing Council member Robert Holzmann said another 50 basis point increase in borrowing costs is “still possible” if the turmoil that has rocked the global banking system does not they get worse.
While acknowledging that the episode, triggered by the collapse of Silicon Valley Bank, could have a comparable effect to interest rate hikes curbing credit, Holzmann said his feeling “is to stay the course” . Similarly, Sunday’s OPEC+ announcement of a surprise production cut should not have a major impact on the path forward, the head of Austria’s central bank said. “If things didn’t really get more dire in May, I think we can afford another 50 basis points”.
3. OPEC effect continues on oil
Investors are still closely following oil prices following Sunday’s OPEC shock, which sent stocks into a tailspin. Brent and WTI both travel above $80 a barrel.
The OPEC production cut was aimed directly at speculators who bet on falling oil prices. According to a Bloomberg, it’s a return to the tactic first used by Saudi Energy Minister Prince Abdulaziz bin Salman in 2020, when he famously said he wanted “the guys in the trading floors to be the most nervous possible".
The new attack on short sellers has been successful. Markets were crowded out and oil futures soared as much as 8%, repricing assets from stocks to bonds. However, OPEC+ has also hit consumers & global economy, stoking inflation concerns and prompting bets on further interest rate hikes.
4. Where is the US economy going?
Investors were weighing Monday’s economic data, which showed US manufacturing activity collapsed in March to its lowest level in nearly three years as new orders plunged.
Analysts said that activity could decline further due to tighter credit conditions. “A weakening trend has been underway since May last year, but the recent banking turmoil may have further eroded confidence”, underlined an ANZ note.
“The manufacturing sector is one of the most rate sensitive in the economy as goods such as cars are purchased primarily on credit”, he added.
Specifically, the Institute for Supply Management’s manufacturing activity gauge fell to 46.3 in March, below the median estimate of 47.5 in a Bloomberg poll of economists. Readings below 50 indicate contraction. New orders and employment recorded a decline.
“The main finding of this report is that the job market is slowing down”, said Jeffrey Roach, chief economist at LPL Financial. This would be exactly what the Fed wants.
For Paul Nolte of Murphy & Sylvest Wealth Management, the fact that the Federal Reserve has indicated that it is data-dependent means two things.
“First, every data point matters. And second, they don’t have a real long-term plan for the economy”, Nolte added. “The lack of a plan means investors are left guessing what the Fed will do based on the latest economic data. This is giving rise to wild swings in the markets”.
As the possibility of a recession looks more certain, the upcoming earnings season could be the first of several challenging quarters, according to Chris Harvey, head of equity strategy at Wells Fargo & Co.
Original article published on Money.it Italy 2023-04-04 08:26:57. Original title: I mercati oggi ripartono da questi 4 punti: perché sono cruciali
