Spreadex Market Update
Risk Sentiment Weaker On Monday Despite UBS/Credit Suisse Deal
Risk sentiment appears rocky as the new week commences, despite news over the weekend that UBS will purchase troubled lender Credit Suisse for $3.2 billion, well above the $1 billion figure originally touted. The all-share deal also comes with a significant amount of guarantees from the Swiss government and SNB. Following the deal, the Fed and other central banks stepped in to open up USD liquidity lines to regional banks in a bid to bolster liquidity in the banking sector. However, markets appear rattled instead of reassured as risk assets turn lower across the European open on Monday.
Key Factors for Today
- USD a little firmer on Monday as risk sentiment remain heavy
- UBS/Credit Suisse deal fails to bolster markets – equities trading with heavy tone
- FTSE hits fresh YTD lows
- Quiet data sheet today
- JPY leads FX on safe-haven demand – risk currencies hard hit
- Gold breaks out to fresh YTD highs – crude hits fresh YTD lows
Coming Up
- EUR – Trade Balance
- EUR – German Buba Monthly Report
- NZD – Trade Balance
Equities Not Convinced… Yet
Equities prices are largely trading in the red on Monday as news of the UBS/Credit Suisse fails to stem investor uncertainty. There are concerns ahead of the Fed and BOE meetings later this week. While traders had been looking for a smaller hike from the Fed, last week’s 50 bps move from the ECB casts come uncertainty with current pricing now roughly split between a 25-bps hike and a 50-bps hike.
FTSE The Biggest Loser
The FTSE remains the biggest mover in indices. The index hit fresh lows for the year today, trading its lowest levels since November. The index is now down more than 10% from YTD highs as investor uncertainty continues to hammer prices lower.
JPY Rallying on Safe-Haven Demand
The fresh weakness in global risk sentiment is feeding into increased demand for the Japanese Yen on Monday. Safe-haven flows have seen JPY emerging as the strongest performer in the G10 space. Risk currencies such as AUD and CAD have been hard hit while EUR has also come under pressure. A quiet data sheet today means that risk flows will remain the key driver behind FX as traders wait to see how banking stocks (and equities generally) perform when UBS shares begin trading later today.
Metals Breakout, Crude Breaks Down
In the metals and commodities space, gold and silver are both trading higher today as gold continues its impressive run of strength. Safe-haven demand for gold has seen the metal breaking out to fresh highs for the year, helping push silver prices higher also. Crude prices remain under pressure at the start of the week as risk aversion sends crude futures down to fresh YTD lows on Monday.
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