Morning wrap (06.04.2023)

• Wall Street indices ended yesterday's session mostly lower. Investor sentiment was weighed down primarily by macro data readings and comments from the Fed's Mester, which point to a slowdown in the US economy.

• The S&P 500 fell 0.25%, the Dow Jones gained 0.24% and the Russell 2000 small-cap index lost 0.99%. The Nasdaq index of technology companies was the weakest performer, losing 1.07%.

• With the specter of a global recession widening, US 10-year government bond yields are under particular scrutiny by investors, having fallen to their lowest level since September 2022 (3.29% zone). Currently, the money market sees a 48% chance of a 25 basis point hike by the Fed at its May meeting and a 52% chance of keeping rates unchanged.

• Asia-Pacific indices traded mostly lower - the Nikkei fell 1.3%, the S&P/ASX 200 lost 0.4%, the Kospi lost 1.32% and the Nifty 50 traded 0.15% higher.

• In the FX market, we are seeing capital outflows to safe haven currencies, i.e. the US dollar and the Japanese yen, among others. The EURUSD pair is recording slight declines and breaking out below the support zone at 1.09. At the moment, pairs linked to the currencies of the antipodes are recording the biggest declines.

• China plans to cut tax burdens and fees totaling CNY1.8 billion for the corporate sector.

• China's Caixin PMI index for services recorded an increase and came in at 57.8 (55 was expected, previously it was 55).

• Former BOJ banker Kazuo Momma commented that the Yield Curve Control mechanism may be terminated this month.

• China may ban exports of technology used to produce high-performance rare earth magnets.

• Energy commodities are posting moderate declines this morning. WTI crude oil is losing 0.5%, while natural gas is down 0.4%.

• Gold is slightly decelerating from its recent upward impulse and is currently consolidating in a zone near 2013 USD. UBS raised its target price for gold at the end of March (2024) to $2200 (previously $2100)

• There is mixed sentiment in the cryptocurrency market. Bitcoin is currently losing nearly 0.5%, while Ethereum is down 1.16%. On the other hand, smaller projects such as Maker and Iota are gaining more than 3.5%. 

Weak macroeconomic data and in-between comments from Fed bankers, which indicate that given the high economic and systemic uncertainty, the rate hike cycle may be coming to an end, are bolstering sentiment in the debt market. Source: xStation 5