JASPER’S MARKET SQUAWK 14-03-2023

Markets Price-in Fed Pivot Despite Bank Backstop

The joint announcement by the Fed, FDIC and Treasury effectively backstopped all deposits at the now-defunct SVB and others that might be in a similar situation. Capital continued to flow into safe havens, with the 2-year Treasury dipping below 4% on rising bets that the Fed might be done with rate hikes while bank stocks cratered.

Chart: XAUUSD

Key Factors for Today

• Fed pivot is more likely as investors expect further action to contain further collapses
• Gold and silver surge as investors rush to safety amid dollar weakness
• EUR/USD spikes as the ECB pushes for a 50 bps hike despite potential SVB fallout
• WTI prices drop on general risk-off attitude from spillover fears
• Strike interruption of LNG terminals in France and US weather send Natgas soaring
• China lifts its ban on coal imports from Australia

Gold Soars 2.50%, Silver 6.25% as Investors Flock to Safety

Weakness in the dollar contributed to a rise in gold following the announcement as it was not enough to assuage investor fears, leading to a rush to government bonds. First Republic and PacWest dropped over 60% during the session as investors sold off ahead of any potential fallout from the SVB collapse. Gold recorded a 3-day streak, up nearly 5.5% in the same timespan, hitting $1915 per ounce with all eyes on $1950 per ounce next. Silver surged 6.25% on Monday alone, with further gains expected to approach $23 per ounce.

EUR/USD Spikes 1% Higher, ECB Pushes for 50 bps Hike

European indices fell through the session with attention on the banking sector, as authorities sought to reassure investors that European firms were not exposed to SVB. Credit Suisse fell to a new record low. Media reported sources from the ECB said the bank intends to hike by 50bps at the next meeting, despite the current market turmoil. EUR/USD spiked 1% to $1.0750 on Monday and settled a tad lower as investors await US CPI data. $1.0680 remains significant support pre and post-release.

General Risk-off Attitude Pushes WTI 5% Lower

WTI prices dropped more than 5% below $73 per barrel on Monday as fears of contagion from the failure of SVB spillover. Bulls managed to reduce losses by the end of the session to 2.40%, but the commodity remains under pressure below $75.50 per barrel.

Strike Interrupts LNG terminals in France, NatGas ~9% Up

Reportedly, a strike blocking access to LNG terminals in France is slated to continue for at least two more days. Meanwhile, New Jersey Governor declared a state of emergency ahead of a winter storm affecting the northeast of the US. Natural gas prices jumped 8.85% higher to $2.70/per cubic foot on Monday, engulfing last Thursday and Friday’s sessions, focusing on $2.82 per cubic foot next.

China Ends Coal Import Ban From Australia

Reportedly, China ended restrictions imposed on Australian coal set up in 2020, allowing all domestic companies to import coal from Australia, effective immediately. Aussie was seen trading as high as 1.60% to $0.6717 at some point Monday but lost half of its gains by the close. Bulls might face resistance at $0.6730 if they hold the grip of $0.6611.

On The Docket

• UK jobs and wages
• Spanish inflation
• US inflation
• API stock change
• ECOFIN meeting
• OPEC monthly report

Fx 1-Day Relative Performance (USD)

• Japanese yen is down by 0.33%
• Swissy and euro 0.26% and 0.31% lower
• Aussie and cable are down by 0.16%
• Kiwi and loonie are unchanged
• Gold and silver are down 0.16% and 0.22%
• Crude and brent down by 1.15% and 1.09%
• Natural gas is up by 0.61%