Headlines

* ECB delivers on 50bp rate hike as bank shares whipsaw

* Oil rises 2% as reports of Saudi. Russia meeting calm investors

* Relief rally on banks’ rescue lifts riskier currencies, USD slips

* Asia stocks gain as bond yields climb, gold remains bid

FX: USD was weaker against almost all its major peers, save the JPY. A deposit announcement by the major US banks helped restore confidence to the banking sector. The DXY closed in a narrow range. The 100-day SMA at 104.82 capped the upside. The US Treasury 2-year yield jumped above 4% again supported by the 200-day SMA around this key psychological level. The 10-year yield also looks to be held up by the 200-day SMA at 3.5%. It had posted another fresh cycle low at 3.36% yesterday amid the volatility.

EUR was relatively unmoved by the ECB. A small bid developed during Lagarde’s press conference. The ECB kept to its earlier guidance and delivered the 50bp hike. The 100-day SMA at 1.0567 looks to be acting as decent support too. Same in GBP which has now moved above its 50-day SMA at 1.2138. A bull flag and push above 1.22 sees further upside. USD/JPY advanced north after hitting a new cycle low at 131.71. The yen underperformed as safe haven flows ebbed.  AUD held steady above 0.66 and is pushing higher this morning above 0.67.  

Stocks: US equities finished well in the green. The benchmark S&P 500 added 1.76%. It closed close to its highs and climbed above the 200-day SMA at 3937. The Nasdaq 100 outperformed again closing higher by 2.69%. The Dow added 1.17%. The index initially lost around 725 points before rebounding. The KBW bank index which has sold off heavily this week amid the banking stress rose 2.6%. Regional US banks, which have been under fire all week, rose. The megacap tech giants like Alphabet, Amazon, Meta and Microsoft all gained more than 3.5%.  

Asian stocks are following Wall Street’s more positive mood. The Nikkei 225 is trading around the 27,000 level. The Hang Seng has made gains and is hovering around the 100-day and 200-day SMAs.

US equity futures are mixed. European equity futures are pointing to a higher open. The Euro Stoxx 50 cash market closed up 2.03% after losing over 3% on Wednesday.

Gold printed a doji candle and an inside day. This pause is fairly normal after its best week in four months. Prices this morning are bid and looking to make new highs above Wednesday’s peak at $1937.

Event Breakdown – ECB open to more hikes

In the end, President Lagarde sounded in control and ready to act when needed. This surprised some who thought she may struggle to convey a solid message in these times of market stress. The ECB dropped its forward guidance owing to the deep uncertainty in markets.

But Lagarde said it was keen to separate financial stability and price stability. This means it will design liquidity solutions to any worsening in the banking sector. This will enable it to continue to fight inflation  which is seen as “too high for too long”. The ECB head also said it had more ground to cover if its baseline forecasts persist. This points to more rate hikes and should underpin support for the euro. The big caveat is obviously the current market stress.

Chart of the Day – Nasdaq punches higher

It’s been a week to remember, full of volatility and whipsaw price action. The reports that US banks would work together to shore up First Republic bank with a $30bn deposit gave investors confidence that a full-scale crisis could be averted. We note that the bank did suspend its dividend after hours and is sharply lower again in after-hours trading. This came a day after the Credit Suisse tumult. The ECB tried to shore up sentiment by reassuring it had the tools to provide liquidity if needed.

We are left with much lower yields which should support growth stocks over value. In fact, growth has outperformed value by nearly 5% this week. The Nasdaq is full of growth stocks and has risen more than 6% over the last four days. We could be printing a bullish engulfing weekly candle. Buyers will aim for the February high at 12,880. Initial support is 12,466 and then around 12k.