Newsquawk

Euro Market Open: Positive momentum continues pre-FOMC with numerous ECB speakers also due

22 Mar 2023, 06:49 by Newsquawk Desk

APAC stocks sustained the momentum from Wall St. where the major indices rallied for a second consecutive day amid further stability in the banking sector
DXY was uneventful with price action across most of the FX space calm ahead of the FOMC; AUD outperformed on risk appetite
US government officials discussed the idea of raising deposit insurance temporarily without approval from Congress, according to Reuters citing sources
US said there are no signs that the summit between Chinese President Xi and Russian President Putin will lead to peace in Ukraine, according to FT
Looking ahead, highlights include UK CPI, FOMC Policy Announcement & Fed Chair Powell's Press Conference, BoC Minutes, Speeches from ECB's Lagarde, Lane, Panetta, Nagel & Rehn, Supply from Germany & UK

US stocks rallied amid further stability in the banking sector and ahead of the FOMC meeting where the consensus is for the central bank to lift rates by 25bps. Nonetheless, some issues remain in the sector with a deal to acquire First Republic Bank, or parts of it, yet to be completed, although large bank CEOs will meet over the next couple of days to find a solution. Meanwhile, reports continued to suggest that officials are looking to raise the FDIC’s deposit insurance ceiling via temporary measures that would allow a bypass of a congressional vote.
SPX +1.30% at 4,003, NDX +1.42% at 11,741, DJI +0.98% at 32,560, RUT +1.88% at 1,778.
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NOTABLE HEADLINES

First Republic Bank (FRC) reportedly tapped Lazard for help with reviewing strategic options and picked global management consulting firm McKinsey for its post-crisis planning, according to WSJ. It was also reported that the First Republic Bank rescue may rely on US backing to facilitate a deal, while bankers at JPMorgan (JPM) working on a First Republic Bank deal are said to be facing difficulties finding a buyer without a significant government backstop, according to FBN's Gasparino.
Major bank CEOs will conduct a two-day summit at a quarterly meeting of the Financial Services Forum in Washington D.C. where First Republic (FRC) will be discussed, according to Reuters and Fox Business News.
US government officials discussed the idea of raising deposit insurance temporarily without approval from Congress but any permanent action would require congressional approval, according to Reuters citing sources.
US SEC scrapped plans for a vote today on a rule that would have increased regulators’ visibility into financial risks at some hedge funds and private equity funds, according to WSJ.

APAC stocks sustained the momentum from Wall St where the major indices rallied for a second consecutive day.
ASX 200 was firmer as energy and the consumer sectors spearheaded the advances in the index which climbed back above the psychological 7,000 level.
Nikkei 225 was boosted as it played catch-up on its return from holiday amid notable strength in the banking industry and with Japan set to allocate more than JPY 2tln from reserves for measures to cushion the blow to the economy from rising prices.
Hang Seng and Shanghai Comp. conformed to the upbeat mood with initial outperformance in Hong Kong, while the advances in the mainland were limited after the PBoC’s liquidity drain and with with reports yesterday suggesting the US is seeking to prevent China from benefitting from its USD 52bln chip funding.
US equity futures traded sideways near the prior day's highs as participants await the FOMC.
European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.2% after the cash market closed up 1.5% on Tuesday.

DXY was uneventful with price action across most of the FX space calm before a potential FOMC storm.
EUR/USD held on to the prior day’s spoils with a firm footing above 1.0700, while there were comments from ECB's Nagel that the fight against inflation is not over and rate setters must be more stubborn in the inflation fight.
GBP/USD traded rangebound amid frictions on the Brexit front after the ERG slammed the Windsor Framework.
USD/JPY price action was indecisive as participants lacked conviction ahead of the FOMC rate decision.
Antipodeans were kept afloat with outperformance in AUD/USD fuelled by the positive risk environment.
PBoC set USD/CNY mid-point at 6.8715 vs exp. 6.8710 (prev. 6.8763)

10yr UST futures attempted to nurse some of the losses from the prior day’s bear flattening but with the rebound restricted by a lack of haven demand.
Bund futures were lacklustre and languished at this week’s lows near a floor around the 136.00 level.
10yr JGB futures gapped lower on return from holiday with prices not helped by the lack of additional BoJ purchases.

Crude futures marginally pulled back overnight following the mostly bearish inventory data but with downside limited after the recent risk-fuelled rebound and composure in the banking sector.
US Private Energy Inventory data (bbls): Crude +3.3mln (exp. -1.6mln), Gasoline -1.1mln (exp. -1.7mln), Distillate -1.8mln (exp. -1.5mln), Cushing -0.8mln.
Petroecuador declared a force majeure on three oil blocks due to community protests.
Spot gold languished at yesterday's lows after recent haven outflows and as markets await the FOMC.
Copper futures were lacklustre despite the constructive mood and mildly eased back below USD 4/lb.

Bitcoin was rangebound overnight and took a breather after its recent rally to above the USD 28,000 level.

NOTABLE ASIA-PAC HEADLINES

Taiwan’s President Tsai plans to transit through New York and LA as part of her trip to Central America, while the Deputy Defence Minister said the Defence Ministry has contingency plans for all moves by China during President Tsai's overseas trip, according to Reuters.
Japanese Chief Cabinet Secretary Matsuno said they will allocate more than JPY 2tln from reserves for measures to cushion the blow to the economy from rising prices, according to Reuters.

Ukrainian President Zelensky invited China for talks on Ukraine but is waiting for an answer. it was separately reported that Zelensky said they need ammunition from partners and need it now, according to Reuters.
US said there are no signs that the summit between Chinese President Xi and Russian President Putin will lead to peace in Ukraine, according to FT.
Syrian Defence Ministry said an Israeli air strike targeted Syria's Aleppo International Airport and caused some damage to it, according to Reuters.
US and South Korea are planning to conduct South Korea's "largest ever" live-fire drills in June as part of a program for the 70th anniversary of the alliance between the two countries, according to Bloomberg.

UK government said GBP 1.8bln was awarded to boost energy efficiency and cut emissions of homes and public buildings across England, according to Reuters.
ECB's Nagel said the fight against inflation is not over and that rate-setters must be more stubborn in the inflation fight, while he added there is still some way to go but we are approaching restrictive territory, according to FT.
Greek PM announces May elections following the rail disaster, according to AFP News Agency.