SVB Fallout Hammers Equities Markets
Global equities benchmarks have come under heavy selling pressure this week as the impact from last week’s SVB collapse develops further. Contagion fears and speculation over which bank might be next are hitting banking stocks hard causing widespread tremors throughout global asset prices.
One of the key consequences of these developments has been the repricing of traders’ Fed and ECB outlooks. Both central banks are expected to be far less hawkish in the face of current conditions. With growing fears over the level of unrealized losses on banks’ balance sheets, the Fed is expected to opt for smaller .25% hike this month, with some calling for no hike at all, while the ECB on Thursday is now expected to scale back its commitment to further rate hikes this year as it monitors developments. This altered view has been helping underpin US markets some but offering little solace elsewhere.
US CPI will be on watch today. The market is looking for headline prices to have cooled to 6% from 6.4% annually last month which should put further downward pressure on USD near-term. However, the extent to which a lower inflation number helps stem the decline in US markets depends solely on how banking stocks perform today. With many individual stocks seeing suspended trading amidst severe selling, the situation is highly precarious. If today’s US CPI data comes in hot once again, this could see equities coming under even heavier selling pressure, muddying the outlook for the Fed.
Technical Views
DAX
The sell off in the DAX has seen the market breaking down through the rising wedge structure and through recent structural support at 15163.41. While below here, and with momentum studies turned bearish, the focus is on a continuation lower and a test of the 14703.98 level next.
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S&P 500
The reversal lower from the 4153.50 level has seen the market breaking down through the rising channel. Price is now testing support at the 3910 level and is retesting the broken bear trend line. With momentum studies bearish here the focus is on a continuation lower near-term.
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FTSE
The sell off in the FTSE has seen the index breaking down through the bull channel and through supports at 7834.7 and 7678.8. With momentum studies bearish the focus is on a continuation lower and a test of the 7337.6 level next.
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NIKKEI
The sell-off in the Nikkei has seen the market moving back under the broken bearish trend line and back under the 27422.9 level. While below here and with momentum studies bearish, focus is on a test of the 26407 level next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.