Spreadex Market Update
Choppy Action in Markets – Eurozone CPI On Watch Today
After getting off to a good start on the back of better data out of China, risk markets in Europe and the US trailed off yesterday, marking a negative start to the month. The latest US ISM manufacturing reading was seen falling slightly short of forecasts at 47.7 vs 47.9 expected. However, the data is unlikely to deter USD bulls with the greenback remaining firm into the end of the week. Flash eurozone CPI will be the main event today. A further cooling is expected, making European stocks vulnerable to a deeper move lower if fresh upside is seen.
Key Factors for Today
- USD back in demand – Fed speaks on watch on today
- Markets slip back on fresh yields rise
- Eurozone CPI in focus today
- GBP falls on Bailey rates comments
- Metals recovery fades, softer start for oil
Coming Up
- EUR – Flash CPI
- GBP – BOE’s Pill speaks
- USD – Fed’s Waller & Kashkari speak
US Stocks Fall As Yields Rise
Equities markets were divided yesterday with European and US stocks seen lower across the session while stocks in the UK and Asia managed to secure a positive first day of the month. In the US, despite the headline ISM manufacturing reading falling, the ‘prices paid’ component was much higher than expected, which fuelled an uptick in yields, keeping stocks pressured. Today, the main event for US traders will be comments from Fed’s Kashkari and Waller.
Eurozone CPI On Watch
In Europe, while traders have already priced in a further 50bps hike from the ECB in March, today’s data will be used as a gauge of whether a further .5% hike will be coming in May. If data is seen undershooting forecasts, however, this should see some lift in European stocks near-term.
GBP Falls on Bailey Rates Comments
The rise in USD has taken a visible toll across FX markets today though GBP has emerged as the weakest counterpart. Weakness began yesterday in response to comments from BOE governor Bailey who seemed to push back against the idea that further rate hikes were a certainty, saying that nothing has been decided yet. With inflation having cooled again last month, traders have taken Bailey’s comments as more of a dovish signal, fuelling some GBP unwind here.
Metals Recovery Fades – Crude Sees Softer Open
In the metals and commodities space, both gold and silver are back under selling pressure today after seeing some better demand yesterday. Flows remain heavily tied to USD movements and so look vulnerable here while USD pushes higher. Crude prices have had a slightly softer open today on the back of a further rally yesterday. Crude futures were boosted yesterday by news of a smaller-than-forecast EIA inventories build of 1.2 million barrels vs 1.7 million barrels expected.
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