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Market Update: Federal Reserve Raises Rates with a Pause on the Horizon; PACW Considers Strategic Options
Today's important market events:
[GBP] UK Composite PMI (Apr) - 10:30 CEST
[GBP] UK Services PMI (Apr) - 10:30 CEST
[EUR] ECB Interest Rate Decision - 14:15 CEST
[USD] Initial Jobless Claims - 14:30 CEST
[EUR] ECB Press Conference - 14:45 CEST
[CAD] Ivey PMI (Apr) - 16:00 CEST
[EUR] ECB President Lagarde Speaks - 16:15 CEST
The Federal Reserve has announced a 25 basis point hike and signaled the possibility of a pause in future rate hikes, although Chairman Powell avoided officially labeling it as such and dismissed speculation of potential rate cuts. In other news, Bloomberg reports that PacWest Bancorp (PACW) is considering various strategic options, including a potential sale.
Following the FOMC announcement, APAC stocks were mixed, with US stocks experiencing a decline after Powell's press conference. European equity futures indicate a slightly softer open, with the Euro Stoxx 50 down 0.1% after a 0.4% increase in yesterday's cash market close.
The DXY remains subdued around the 101 mark, while the EUR/USD pair is aiming to reach 1.11 to the upside, and Cable hit a new year-to-date peak.
Australia/New Zealand:
- ASX 200 opens -0.2% at 7,186
- National Australia Bank (NAB.AU) reports H1 cash profit of A$4.07B vs. A$4.18B estimate, NII of A$8.5B vs. A$7.1B YoY, and revenue of A$10.6B vs. A$9.1B YoY.
- Australia Mar trade balance (A$): 15.3B vs. 13.0B estimate
- RBNZ Gov Orr: Unemployment is remarkably low, according to parliamentary testimony
- New Zealand sells total NZ$400M in 2026, 2032, and 2041 bonds, matching the indicated amount
- New Zealand Mar building permits M/M: 7.0% vs. -9.4% prior
- New Zealand Apr ANZ commodity price M/M: -1.7% vs. 1.3% prior
- RBNZ Dep Gov Hawkesby: New Zealand financial system remains resilient
China/Hong Kong:
- Hang Seng opens flat at 19,695
- Shanghai Composite opens -0.5% at 3,306 after an extended holiday
- Hong Kong Apr PMI (whole economy): 52.4 vs. 53.5 prior (4th straight expansion)
- Hong Kong Monetary Authority (HKMA) raises base rate by 25bps to 5.50% as expected
- Hong Kong aggregate balance to decline to ~HK$44.5B on May 5th, the lowest level since 2008, following currency interventions by the HKMA
- HKMA's Chief Yue: Hong Kong banks have no exposure to US "troubled banks"
- CNY113B of China stock lockups expected to expire this week, up over 50% WoW, relating to over 40 companies - China Securities
- China Apr Caixin PMI Manufacturing: 49.5 vs. 50.0 estimate, the first contraction in three months
- IMF Report: China's economy to see slowdown in productivity and investment over medium-term; Affirms China's 2023 GDP growth forecast of ~5.2% (also comments on Japan and South Korea)
- China PBOC Open Market Operation (OMO): Sells CNY33.0B vs. CNY165B prior in 7-day reverse repo: Net drains CNY529B vs. injects CNY77B prior [from Apr 28th]
- China PBOC sets Yuan reference rate: 6.9054 vs. 6.9240 prior [from Apr 28th]
- US to allow China airlines to expand flights to the US, according to FT
Japan:
- Nikkei 225 closed for holiday
- NATO said to be planning to open a liaison office in Japan (1st of its kind in Asia), according to Nikkei (update)
South Korea:
- Kospi opens -0.3% at 2,494
- Bank of Korea (BOK) to closely monitor markets as volatility could increase, according to statement [following US Fed decision]
- South Korea Fin Min Choo: Markets are generally stable; US Fed's latest decision is positive for local markets
- South Korea Apr foreign reserves: $426.7B vs. $426.1B prior (update)
- Samsung (005930.KR) could face the first-ever labor strike; notes wage negotiations 'fell through'; the labor union is expected to give an update on Thursday
North America:
In April, the NACM US Credit Managers diffusion index for rejection of credit applications came in at 47.9 versus 50.6 in the prior month, which is the lowest reading since July 2009. Meanwhile, the ADP Employment Change for the same period rose to 296K from 148K, indicating that employers are hiring aggressively while keeping pay gains in check. Job changers experienced the slowest pace of wage growth since November 2021. Additionally, the ISM Services Index for April came in at 51.9 versus an estimated 51.8, with the Business Activities Index reaching its lowest level since May 2020, and the New Orders Index rising to 56.1 from 52.2 in the prior month. In financial news, Western Alliance Bancorp (WAL) reported updated financial information, stating that there were no unusual deposit flows and reaffirming its $2 billion quarterly deposit growth rate guidance. End-deposits as of May 2nd were $48.8 billion, compared to $47.2 billion on March 31st. Meanwhile, PacWest Bancorp (PACW) confirmed that its Board of Directors continuously reviews strategic options and has been approached by several potential partners and investors. The bank also stated that it has not experienced any unusual deposits outflows, with end-deposits as of May 2nd coming in at $28 billion compared to $28.2 billion on March 31st. The Fed Fund Futures imply a 22% chance of a rate cut in June and a 72% chance of a rate cut in July. Lastly, the US Senate voted to restore solar panel tariffs of up to 254%, with the vote coming in at 56-41.
Europe:
Russia's Deputy Prime Minister, Novak, stated that the fall in oil prices requires the OPEC+ to study potential responses.
Commodity Market Update: Crude Futures Recover Despite PacWest's Potential Sale, Gold Volatile at Reopen, Copper Supported by Largest Purchaser's Return
Crude futures initially saw declines this week after PacWest Bancorp reportedly considered strategic options, including a potential sale, which dragged WTI crude futures below the USD 64/bbl level. However, crude futures staged a gradual and full recovery. Russia's Deputy PM Novak commented that the fall in oil prices requires a detailed study for a possible OPEC+ response. Norway's Lederne labor union averted the risk of strike action with a wage deal for oil workers.
Spot gold was volatile at the reopen and spiked by around USD 40 to briefly above USD 2080/oz amid a flight to safety but eventually reversed all gains and heads into the European session relatively unchanged. Copper futures were underpinned as the largest purchaser returned to the market from a 5-day closure and with prices unfazed by the disappointing Caixin Manufacturing PMI data.
Looking ahead, today's economic calendar features several key events, including the release of the German Trade Balance, EZ & UK Composite/Services PMI, US IJC, as well as policy announcements and press conferences from the ECB and Norges Bank, and the BoE DMP. Additionally, investors will be keeping an eye on supply from Spain and France.
On the earnings front, a number of companies are due to report, including Volkswagen, Infineon, Hugo Boss, BMW, AB InBev, Adecco, Shell, Apple, Kellogg, AEP, Moderna, Paramount, and Conoco.
General news - Information source from multiple newswires.
The article and the data is for general information use only, not advice!
The Trade Academy Team
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