Risk Markets Firmly Bid on Tuesday

Despite a lower opening yesterday, risk assets were seen climbing over the course of the day as traders digested news of the UBS/Credit Suisse deal and were reassured by global central banks. EU authorities insisted the Credit Suisse bailout was a specific situation, reassuring broader investors over concerns linked to the treatment of the banks’ bondholders. In the US, traders looked beyond the ongoing difficulties with First Republic Bank and were instead buoyed by the prospect of a less hawkish FOMC this week. The general view seems to be moving away from that of systemic banking risks towards each bank being an individual case. Alongside less hawkish central bank expectations, this is helping risk sentient recover for now.

Key Factors for Today

• USD weaker as focus shifts to risk rebound on Tuesday
• Equities rallying across the board as traders shrug off banking sector risks and focus on less hawkish central bank expectations
• EUR leads FX – Lagarde speaks again today
• Metals reversing from highs – oil holding near lows

Coming Up

• EUR – German ZEW Economic Sentiment
• CAD – CPI
• EUR – ECB’s Lagarde Speaks

Equities Bouncing Back

Equities prices were seen bouncing back yesterday. Despite a heavy opening tone, indices around the globe were seen trading into the green with many opening positively on Tuesday. Scaled back expectations for tomorrow’s FOMC outcome are the main driver of equities upside currently. With pricing split between a smaller 25 bps hike and no hike at all, traders have very likely avoided the 50 bps hike which was priced in as recently as the two weeks ago.

Nike Earnings Due

Nike is due to report Q3 FY2023 earnings later today. Wall Street is looking for EPS of $0.55 on revenues of $11.482 billion. This will mark a downturn from the prior quarter’s results though, if confirmed, revenues at this level would be higher than they were at the same time last year. Should earnings undershoot forecasts, however, this would see Nike ending a ten-quarter winning streak, likely to put its stock price under pressure near-term.

EUR Leading FX – Lagarde on Deck

EUR has roared back into demand on Tuesday, leading FX as the strongest currency over the European open today. A better tone to risk markets as well as reassurances from EU regulators over the health of the EU banking sector is helping support sentiment. ECB’s Lagarde speaks again later today. Yesterday, Lagarde told the EU parliament that market turmoil might actually help the ECB by driving down demand and said that current developments wouldn’t stop the bank from pursuing its target of price stability.

Metals Reversing From Highs 

In the metals and commodities space, gold and silver are reversing sharply from recent highs. The rebound in risk appetite on Tuesday is fuelling a reversal of recent strength for metals. Tomorrow’s FOMC meeting will be make or break with room for metals to continue higher if the Fed did decide to hold rates unchanged. Crude prices are a little flatter at the open today. Futures remained under pressure yesterday and are still not quite enjoying the risk-led gains we are seeing elsewhere as market uncertainty lingers for oil traders.