Market Wrap: 5 April 2023

Market Wrap: 5 April 2023

Equities Decline Amid Caution Over Rates, Banks: 

  • Two-year Treasury yield rises following 14 basis-point drop
  • New Zealand dollar climbs after central bank’s surprise hike

European equity futures and Asian shares slipped as concerns persisted over the path of global monetary policy and the health of US banks. New Zealand’s dollar rallied and the nation’s stocks retreated after the central bank raised interest rates by more than expected. 

Stocks in Europe may struggle for traction at open as Euro Stoxx 50 contracts dropped about 0.2%. Investors in the region were are awaiting the release of March purchasing manager index data for trading cues.  

MSCI Inc.’s Asia benchmark was set to end a six-day winning streak, with almost all sectors in the red Wednesday. Futures for US equities were little changed after posting small gains earlier. The S&P 500 had dropped on Tuesday, dragged down by shares of financial heavyweights. Chinese markets are closed for a holiday.

A measure of greenback strength was steady and most major currencies traded in narrow ranges. The New Zealand dollar jumped to the highest level since mid-February following the unexpected 50-basis-point rate hike. The nation’s two-year government bond yields surged about 12 basis points.

The Australian currency gave up its advance and the policy-sensitive three-year government bond yield fell fell. The governor of the Reserve Bank of Australia said Wednesday that rates may still rise. The RBA paused its tightening cycle on Tuesday.


Meanwhile, the two-year Treasury yield ticked higher after declining 14 basis points in the US session as data showed a drop in job openings. That bolstered bets the Federal Reserve will soon wrap up its tightening campaign. Treasuries underwent one of the most turbulent quarters in years in the period through March as traders debated the outlook for inflation amid fears of contagion from the banking sector’s turmoil.

Swap contracts downgraded the odds of a quarter-point rate hike at the Fed’s May meeting easing to around 50% from closer to 60%.

Bond markets are dealing with uncertainty as to what central banks will do, according to Vasu Menon, executive director of investment strategy at Oversea-Chinese Banking Corp. in Singapore. “How much more can they do because they’ve done a lot and inflation is not showing a big fall back to the 2% to 3% targets that most of them have,” he said on Bloomberg Television.

Banks came under renewed pressure Tuesday, with a gauge of financial heavyweights in the US falling the most in almost two weeks. In a wide-ranging annual letter to shareholders, JPMorgan Chase & Co.’s chief Jamie Dimon warned the US banking crisis that sent markets careening last month will be felt for years.

“I think Jamie is correct in the sense that this may not be the last shoe to drop,” Amy Kong, chief investment officer at Barrett Asset Management, said on Bloomberg Television. “There will be broader ramifications to stock market prices as well as earnings.”

Vacancies at US employers sank in February to the lowest since May 2021, the Labor Department’s Job Openings and Labor Turnover Survey showed Tuesday. The reading was below all estimates in a Bloomberg survey. 

Elsewhere, oil extended its rally with West Texas Intermediate rising past $81 a barrel. Gold was marginally higher and Bitcoin trended above the high end of its recent range of around $28,000. 

Key events this week:

  • Eurozone S&P Global Eurozone Services PMI, Wednesday
  • US ADP employment change, Wednesday
  • US trade, Wednesday
  • US initial jobless claims, Thursday
  • St. Louis Fed President James Bullard speaks, Thursday
  • US unemployment, nonfarm payrolls, Friday
  • Good Friday. US stock markets closed, bond markets close for part of the day



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