MNI US OPEN: Firmer Bank Shares Provide Short-Lived Support

NEWS

CORPORATE (BBG): US Mulls More Support for Banks While Giving First Republic Time

US authorities are considering expanding an emergency lending facility for banks in ways that would give First Republic Bank more time to shore up its balance sheet, according to people with knowledge of the situation. Officials have yet to decide on what support they could provide First Republic, if any, and an expansion of the Federal Reserve’s offering is one of several options being weighed at this early stage. Regulators continue to grapple with two other failed lenders — Silicon Valley Bank and Signature Bank — that require more immediate attention.

CORPORATE (BBG): First Citizens Buys Silicon Valley Bank After Run on Lender

First Citizens BancShares Inc. agreed to buy Silicon Valley Bank which was seized by regulators following a run on the lender. The Raleigh, North Carolina-based bank entered into a purchase and assumption agreement for all deposits and loans of SVB, according to a statement from the Federal Deposit Insurance Corp. The deal includes the purchase of about $72 billion SVB assets at a discount of $16.5 billion, the FDIC said.

MNI BOE REVIEW: Growth Data Takes on Added Importance

The MPC delivered this 25bp hike with a 7-2 vote (Dhingra and Tenreyro both voting for unchanged rates). If taken at face value, given how much the MPC played down the significance of the February inflation print, there is more emphasis being placed on growth data than we would previously have expected. We continue to expect the labour market data released on 18 April and March inflation data due the following day will be the key data to watch, but think that growth data will take on increased significance now, too. For now we think that a May hike hangs in the balance.

ECB (BBG): Financial Stability Is Important for ECB Policy, Simkus Says

Financial stability is an important factor in assessing the transmission of the European Central Bank’s monetary policy, according Governing Council member Gediminas Simkus.While bank liquidity and capital are high, the international situation must be monitored, Simkus, who heads Lithuania’s central bank, told reporters Monday in Vilnius.

ECB (MNI): Banking Turmoil Could Further Tighten Conditions

Recent tensions in financial markets following the collapse of Silicon Valley Bank and the Credit Suisse takeover could generate additional tightening of financial conditions across the Eurozone, putting downward pressure on economic activity and inflation, Bank of Spain Governor Pablo Hernandez de Cos said Monday.

GERMANY (BBG): Germany Faces Day of Travel Chaos As Airport, Rail Staff Strike

Germany’s air and rail services ground to a halt Monday during a one-day strike as workers join peers in France and the UK to fight for higher pay. The industrial action began at midnight Sunday for 24 hours and also affects some ports, with the Verdi and EVG transport and railway unions coming together in a strike that resulted in severe disruption to travel. Verdi is demanding a raise of 10.5% for public sector workers.

CHINA (MNI): China to Meet 5% Target, Monetary Policy Has Room

China can achieve its economic target of “around 5%” growth this year and monetary policy has room to maneuver as inflation remains mild, said Han Wenxiu, executive deputy director of the office of the Central Committee for Financial and Economic Affairs, at the China Development Forum 2023 on Saturday.

CHINA (MNI): Debt Won't Hamper China’s Growth, Ample Govt Assets

China’s growing debt will not severely hamper economic growth as the government's relatively healthy balance sheet helps offsets any issues, said Li Yang, chairman of National Institution for Finance and Development, told the China Development Forum 2023 on Saturday.

CHINA (MNI): More Migrant Worker Services to Grow China's Demand

China should alleviate the shortage of basic public services to unleash potential demand, particularly equalising services for nearly 300 million migrant workers, Liu Shijin, a member of monetary policy committee of People’s Bank of China, told MNI on the sidelines of the China Development Forum 2023 on Saturday.

ISRAEL (MNI): KAN - Netanyahu Tells Coalition Heads Judicial Reforms to Be Paused

Israel's KAN broadcaster is reporting that PM Benjamin Netanyahu has informed the heads of the parties forming the governing coalition that he will be pausing the proposed judicial reforms. This comes in the face of huge public protests, rebellion from moderates within the coalition, and a general strike that is seeing airports, hospitals, and commerce shut down or reduce service.

DATA

GERMAN DATA (MNI): Ifo Survey Beats Expectations, Signals Stronger Outlooks in March

• GERMANY MAR IFO BUSINESS CLIMATE 93.3 (FCST 91.0); FEB 91.1
• GERMANY MAR IFO CURRENT COND 95.4 (FCST 94.1); FEB 93.9
• GERMANY MAR IFO EXPECTATIONS 91.2 (FCST 88.3); FEB 88.4r

The German Ifo survey recorded a fifth month of improvement for the German economy in March. The headline index rose 2.2 points and expectations by 2.8 points, likely boosted by cooling energy costs and less weak global demand outlooks. March Ifo improvements materialised despite volatility in the international banking sector in recent weeks, which largely underpinned consensus looking for only a marginal current conditions uptick overall. After the slide in the March ZEW survey of financial market experts, the stronger Ifo survey implies that recent volatility has not notably spilled over to the real economy for now.

JAPAN DATA (MNI): Japan Feb Services PPI Rises 1.8% Vs. 1.6% in Jan

Japan’s services produce price index rose 1.8% y/y in February, accelerating from January’s 1.6% pace and showing services prices are rising due to severe labor shortages, preliminary data released by the Bank of Japan on Monday showed. BOJ officials are focused on whether services prices will continue rising as Japan’s inflation rate will rise in a stable and sustainable manner unless services prices rise. Officials continue to focus on wage hikes in the service sector and the impact on retail prices.

FOREX: USD Dip Short-Lived, Sentiment Remains the Key Driver

• The USD faded in early Europe Monday as European equities got off to a strong start thanks to a bounce in bank shares. The likes of Deutsche Bank, BNP Paribas and others surged at the open to erase a decent portion of the losses suffered Friday, while CDS spreads tightened.
• The dip in the greenback proved short-lived, however, with the stability fading through toward the NY open as the e-mini S&P dipped back into negative territory. As a result, haven currencies including the JPY are off the lowest levels of the day, although remain in negative territory since the resumption of trade Sunday night.
• The sole release of the morning was Germany's March IFO data, wich came in just ahead of expectations - but left little market impact. Volumes are generally below average for this time of day after several more frantic sessions, with most currency futures pointing to subpar activity ahead of NY hours.
• Data releases are few and far between Monday, keeping focus on the speaker slate as ECB's Nagel, Elderson, Centeno and Schnabel are on the docket. BOE's Bailey is also set to testify on the purchase of SVB UK by HSBC and Fed's Jefferson speaks on monetary policy after the market close.

BONDS: Bear Flattening on Banking Optimism

• Curves have bear flattened across core FI markets this morning on hope for further support for the U.S. banking sector (in lieu of a weekend source report from BBG) and after First Citizens Bank acquired SVB.
• Bunds saw their lows of the day around the gilt / equity open while gilts continue to grind lower and TY1 futures have moved back to their lows of the day after moving a bit higher earlier. The bigger moves are in the short-end, however, with 2-year yields up over 10bps across USTs, Bunds and gilts.
• Looking ahead we have a number of ECB speakers still due up today while BOE Governor Bailey is due to speak after gilt markets close this evening and we are also due to hear from the Fed's Jefferson.
• TY1 futures are down -0-14+ today at 115-21 with 10y UST yields up 5.4bp at 3.432% and 2y yields up 11.4bp at 3.884%.
• Bund futures are down -0.90 today at 137.10 with 10y Bund yields up 7.0bp at 2.194% and Schatz yields up 11.3bp at 2.493%.
• Gilt futures are down -0.98 today at 104.83 with 10y yields up 8.4bp at 3.362% and 2y yields up 10.1bp at 3.291%.
  

EQUITIES: Headline Future Indices Dip Despite Support From Bank Names

Eurostoxx 50 futures remain below last week’s high of 4164.00 on Mar 22 high. The pullback threatens the recent bull theme and signals the possible end of what appears to have been a corrective bounce. A continuation lower would open 4009.50, 61.8% of the Mar 20 22 rally. A move below the 4000.00 handle would expose 3914.00, the Mar 21 low and bear trigger. Key short-term resistance is 4164.00, the Mar 22 high. A break would be bullish. S&P E-Minis reversed sharply lower last Wednesday. The move down means that price has - so far - failed to remain above pivot resistance at the 50-day EMA. The EMA intersects at 4020.71 and price is again testing this level today. A clear break of it is required to strengthen bullish conditions. Support today lies at 3937.00, the Mar 24 low. A breach would open 3897.25 next, the Mar 20 low. Key short-term resistance is at 4073.75, the Mar 22 high.

• Japan's NIKKEI closed higher by 91.62 pts or +0.33% at 27476.87 and the TOPIX ended 6.52 pts higher or +0.33% at 1961.84.
• Elsewhere, in China the SHANGHAI closed lower by 14.257 pts or -0.44% at 3251.397 and the HANG SENG ended 347.99 pts lower or -1.75% at 19567.69.
• Across Europe, Germany's DAX trades higher by 113.27 pts or +0.76% at 15070.79, FTSE 100 higher by 44.88 pts or +0.61% at 7450.75, CAC 40 up 49.57 pts or +0.71% at 7064.67 and Euro Stoxx 50 up 26.51 pts or +0.64% at 4157.13.
• Dow Jones mini up 69 pts or +0.21% at 32503, S&P 500 mini up 8.5 pts or +0.21% at 4010, NASDAQ mini up 3.75 pts or +0.03% at 12893.

COMMODITIES: Gold Technical Conditions Bullish Despite Short-Term Pullback

WTI futures remain in a downtrend and last week’s recovery appears to be a correction. Note that the latest move higher has allowed a recent oversold condition to unwind. Firm resistance is seen at $72.51 the 20-day EMA. Recent weakness confirmed a resumption of the broader downtrend and has paved the way for a move towards $62.43, the Dec 2 2021 low. The bear trigger is $64.36, the Mar 20 low. Trend conditions in Gold remain bullish and the recent short-term pullback is considered corrective. The breach on Mar 17 of former resistance at $1959.7, Feb 2 high, confirmed a resumption of the bull trend that started late September 2022. The test above $2000.0 opens $2034.0 next, a Fibonacci projection. $1918.3 is seen as a firm support. It is the Mar 17 low and a break would signal scope for a deeper pullback.

• WTI Crude up $0.66 or +0.95% at $69.8
• Natural Gas down $0.11 or -5.01% at $2.104
• Gold spot down $7.33 or -0.37% at $1970.41
• Copper down $3.15 or -0.77% at $403.95
• Silver down $0.16 or -0.67% at $23.0729
• Platinum down $12.28 or -1.25% at $971.65