Equities in the red, USD bid & GBP lags as Gilts extend gains; Fed’s Powell due - Newsquawk US Market Open
European bourses post modest losses whilst the NQ & ES teeter around the unchanged mark, RTY lags slightly. Bonds extended gains with Gilts outpacing counterparts though ultimately fell short of 96.00 level, with the complex now off best levels & USTs lower. USD bid with the index printing…
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"[HEADLINES:]

  • European bourses post modest losses whilst the NQ & ES teeter around the unchanged mark, RTY lags slightly.
  • Bonds extended gains with Gilts outpacing counterparts though ultimately fell short of 96.00 level, with the complex now off best levels & USTs lower.
  • USD bid with the index printing a 105.87 high, putting downward pressure on G10 peers; GBP bearing the brunt & largely attributed to outperformance in Gilts.
  • Crude continues to crumble but has lifted from lows most recently amid a magnitude 5 earthquake in western Texas
  • Looking ahead, highlights include US Wholesale Prices, NBP Policy Announcement; BoC Minutes, Speeches from Fed’s Powell, Williams, Barr & Jefferson; BoE’s Bailey; Supply from US. Earnings: Telecom Italia, Ralph Lauren, Kellogg, Disney, BlackRock, Warner Bros Discovery & Disney.

FX

  • Greenback continues to grind higher and claw back losses, DXY edged closer to 106.00 within firmer 105.51-87 range.
  • Pound extends post-Pill declines as Cable probes 1.2250 and EUR/GBP pops back above 0.8700.
  • Euro and Yen unable to evade Dollar recovery, with EUR/USD down towards base of 1.0660-1.0700 range and USD/JPY closer to 151.00 than 150.00.
  • Loonie undermined by the ongoing plunge in oil as USD/CAD approaches 1.3800 head of Canadian building permits and BoC minutes.
  • PBoC set USD/CNY mid-point at 7.1773 vs exp. 7.2839 (prev. 7.1776)
    • Brazilian government will not ask Congress to alter fiscal target for now, according to Reuters sources.
  • Click here for more details.
  • Click here for the Option Expires for the NY Cut.

COMMODITIES

  • Crude benchmarks have recently slumped further into the red, in a continuation of the price action that was in play during yesterday’s session; slumping to current session troughs of USD 76.51/bbl and USD 80.87/bbl with fresh fundamentals limited but the move occurring alongside a further bout of USD upside.
  • Most recently, it is worth pointing out that a magnitude 5 earthquake has occurred in western Texas, according to the EMSC. We are yet to see any updates as to what, if any, commodity activity in the region has been affected, but it is worth highlighting that the crude futures lifted slightly from the mentioned session lows on this update.
  • Spot gold has similarly slipped to fresh lows, occurring alongside a fresh bout of USD upside with the DXY at session bests and moving ever closer to 106.00.
  • Finally, base metals are slightly mixed but for the most part have not strayed significantly from relatively contained levels.
  • US Private Energy Inventories (bbls): Crude +11.9mln (exp. -0.3mln), Gasoline -360k (exp. -0.8mln), Distillates +980k (exp. -1.5mln), Cushing +1.1mln.
  • Nornickel says some clients who previously rejected purchasing from us are discussing metals purchases in 2024, via Ifx.
  • Click here for more details.

NOTABLE EUROPEAN HEADLINES

  • BoE's Bailey says the big shocks of last year and a bit before the unwinding; expects next inflation read to be quite a bit lower; expect it to be quite a bit lower by year-end, not down to 2%. We think policy is now restrictive and economic growth is very subdued. Basic message is that we believe policy will need to be restrictive for extended periods and there are upside risks.
  • Norges Bank FSR: The financial system is marked by higher interest rates; Households draw on savings; Households draw on savings; Norwegian banks are well equipped to absorb higher losses.

NOTABLE US HEADLINES

  • US Treasury said no trade partners manipulated currencies; China remains on the monitoring list due to lack of transparency for its foreign exchange practices. Vietnam is back on the monitoring list; removing Switzerland and South Korea from the same scrutiny.
  • Fed's Cook (Neutral, Voter) says persistent inflationary pressures and unexpected policy rate increases abroad are among risks to global financial system. Further slowdown in China could worsen financial stresses with possible international spill overs. Must remain vigilant to potential shocks that could exacerbate global financial system vulnerabilities. Escalation of global geopolitical tensions could also lead to negative international spill overs.
  • Click here for the US Early-Morning note.

GEOPOLITICS

  • US President Biden told Israeli PM Netanyahu that a 3-day fighting pause [which Netanyahu rejected...] could help secure the release of some hostages, according to Axios.
  • Saudi Arabian investment minister says that discussions aimed at normalising ties with Israel will continue despite KSA's criticism of Israeli military actions in Gaza, according to Bloomberg. Adds will be contingent on a peaceful resolution to the Palestinian conflict."