Finance Friday
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Market Data
Local
Global
*Data as of 4pm WAT
Market News
Local
Global
Market Commentary:
Currencies/Macro:
The US dollar increased against major currencies. Specifically, the USD/JPY pair rose by 40 pips to 151.65, returning to its level before the Federal Open Market Committee (FOMC) meeting. The EUR/USD dropped from 1.0925 to 1.0860. Following a Swiss interest rate cut, the EUR/CHF pair increased from 0.9680 to 0.9780, making the Swiss franc the weakest in the G10 group for that day. The GBP/USD decreased by 1.3 cents or -1.1% to 1.2650, showing minimal immediate reaction to the Bank of England's decision.
The US S&P Global flash March manufacturing PMI increased to 52.5, indicating industry expansion. However, the services PMI slightly declined to 51.7. Noteworthy price increases were reported in both sectors, with service prices reaching a peak since September 2023 and manufacturing prices at their highest since May 2022. The Philadelphia Fed business survey and the Conference Board's leading index both showed positive developments, suggesting economic optimism. US jobless claims remained low, reinforcing a strong labor market. Home sales unexpectedly surged by 9.5% in February.
The Eurozone manufacturing PMI was weaker at 45.7, particularly due to slowdowns in Germany and France, while service sector activity remained robust at 51.1. The Bank of England held its policy rate at 5.25%, with the decision-making process reflecting careful consideration of economic trends.
The Swiss National Bank reduced its interest rate to 1.50%, indicating effective inflation control. Norway's central bank kept rates steady but suggested potential future rate cuts might be postponed.
Interest Rates:
The US 2-year Treasury yield increased from 4.55% to 4.64%, compared to 4.67% before the Federal Open Market Committee (FOMC) meeting, while the 10-year yield climbed from a low of 4.22% to 4.27%. The market anticipates the Federal funds rate, currently at a midpoint of 5.375%, to remain constant at the upcoming meeting on May 2, with a 70% probability of a reduction by June.
In the credit markets, the new series experienced a robust session following the roll, with Main tightening by 2 basis points to 53.5 and CDX improving by half a basis point to 50.5. US investment-grade (IG) cash markets also saw improvements of 1-3 basis points, catching up after the Fed's announcements. However, primary market activity decelerated amidst the series of central bank (CB) updates. In Europe, five issuers successfully priced EUR 3.9 billion, whereas in the US, three issuers entered the market post-FOMC, pricing USD 2.9 billion (totaling USD 27.8 billion for the week).
Commodities:
Crude oil markets experienced a slight downturn as a strengthening US dollar applied downward pressure on prices. The May West Texas Intermediate (WTI) contract decreased by 0.46% to $80.90, and the May Brent contract also fell by 0.46% to $85.61. Notably, India's Reliance Industries, which operates the world's largest oil refinery, is reportedly refusing deliveries of Russian oil transported on tankers by Sovcomflot, responding to recent US sanctions. This move is echoed by other Indian refiners planning to avoid Sovcomflot vessels. Additionally, there are reports of two tankers loaded with Russian Urals crude idling off India's west coast for over three weeks. In related news, Houthi rebels have assured China and Russia that their ships can traverse the Red Sea and Gulf of Aden without facing attacks.
In the natural gas sector, Germany is set to commence construction of its first permanent liquefied natural gas (LNG) terminal shortly, following a final investment decision by Hanseatic Energy Hub GmbH. Meanwhile, in the US, Freeport highlighted that the development costs for new LNG liquefaction facilities have nearly doubled in the past eight years, while contract prices for LNG have declined. This cost-price dynamic suggests that upcoming LNG terminal projects may face delays, increased expenses, and slim profit margins.
In the metals market, prices remained resilient despite the stronger dollar, with copper increasing by 0.4% to $8,963.5. Aluminum gained 1.58%, closing above $2,300 for the first time since January, buoyed by a decline in International Aluminium Institute (IAI) production data and a 3.48% monthly drop in Chinese output. Zinc also saw an uptick of 0.9% to $2,532, supported by news of Glencore suspending operations at its McArthur River zinc and lead mine in Australia's Northern Territory due to heavy rainfall from Tropical Cyclone Megan.
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