Trading Tuesday
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Market Data
Local
Global
*Data as of 4pm WAT
Market News
Local
Global
Market Commentary:
Currencies/Macro:
The US dollar exhibited strength or remained steady compared to G10 currencies. The EUR/USD dropped by 20 pips to 1.0870. The GBP/USD saw minimal changes, maintaining at 1.2725. The USD/JPY experienced a minor increase to 149.15.
In the United States, the National Association of Home Builders (NAHB) index indicated a rise in homebuilder confidence to 51 for March, surpassing expectations set at 48 and the previous value of 48. This marks the highest confidence level since July 2023, signifying a return to expansionary territory, albeit marginally. Notably, this uptick was primarily driven by the current single-family sales index, suggesting increased optimism in this housing sector segment.
On the European front, European Central Bank (ECB) member Pablo Hernandez de Cos from Spain remarked that the recent declaration of achieving the 2% inflation target aligns with the possibility of an imminent rate reduction, potentially occurring as soon as June. This statement reflects a growing sentiment within the ECB for adjusting monetary policy in response to the current economic and inflationary landscape.
Interest Rates:
The US 2-year Treasury yield increased from 4.71% to 4.74%, reaching a four-month peak, while the 10-year yield ascended from 4.29% to 4.34%, also marking a four-month high. Market expectations suggest that the Federal Reserve's funds rate, currently at 5.375% mid-point, will remain stable in this week's meeting, with a balanced 50% probability of a rate decrease by June.
Credit markets saw an improvement following a weaker close the previous week, with the Main index tightening by half a basis point to 53, and the CDX index narrowing by a basis point to 49. U.S. investment-grade cash spreads also tightened by 1-2 basis points, indicating a robust start for primary market activities amidst a week anticipated to be interrupted by central bank (CB) meetings. In Europe, eight issuers accessed the market, securing EUR 11.5 billion, whereas in the U.S., eight issuers managed to raise USD 6.7 billion.
Commodities:
Crude oil markets reached their highest levels since October, fueled by positive Chinese activity data and increasing concerns over the effects of Ukrainian drone attacks on Russian refineries. The April West Texas Intermediate (WTI) contract rose by 2.3%, reaching its highest mark since mid-October, and the May Brent contract increased by 2%, reaching $87.02. Remarkably, China reported a record fuel processing volume in January and February, with 118.76 million tonnes (mt) of crude refined, marking a 3% increase to an all-time high.
Crude trading firm Gunvor estimated a significant reduction in Russia's daily refining capacity, approximately 600,000 barrels, as a direct result of Ukrainian drone attacks. This impact is expected to immediately affect distillate exports, likely reducing Russia's export volumes by several hundred thousand barrels. Concurrently, the April European gasoil contract experienced a 2.6% rise, surpassing the peak levels observed in September of the previous year. Additionally, Iraq announced plans to curtail oil exports in the upcoming months to offset its overproduction relative to its designated quotas in January and February.
Investment Tip of The Day
Incorporate currency diversification into your investment strategy to mitigate the risk of currency devaluation or inflation in your home country. By holding assets in multiple currencies or investing in foreign markets, you can protect your purchasing power and potentially benefit from the economic growth of other regions. This strategy can add an extra layer of security and opportunity to your wealth management approach.