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Europe stocks rise on ECB rate decision

 

Friday, March 17, 2023

The news shaping the markets today

Poland’s President said the country will be sending four MiG-29 fighter jets to Ukraine in the coming days. The safe-haven US dollar index fell this morning.


Canada’s wholesale sales grew by 2.4% to C$84.2 billion in January but came in below the estimate of 3%, exerting pressure on the CAD/USD forex pair.


US export prices rose by 0.2% in February, versus market estimates of a 0.1% decline, which sent the Dow Jones index higher by over 350 points on Thursday.


Singapore’s non-oil domestic exports fell by 15.6% year-over-year in February. However, the data was better than market expectations of a 16% decline and lent support to the SGD/USD forex pair.


Portugal’s producer prices rose 8.8% year-over-year in February, the least since April 2021, which sent the EUR/USD pair higher in forex trading this morning.

 

What’s happening: European stocks settled higher on Thursday in a choppy trading session.

What happened: The ECB (European Central Bank) announced plans to raise interest rates despite recent concerns around the banking environment.

The Swiss National Bank’s decision to provide liquidity to Credit Suisse also lent support to European equities.

Why it matters: The ECB hiked interest rates by 50 bps at its latest meeting, sending borrowing costs to their highest level since late 2008.

The central bank now projects inflation to average 5.3% this year, 2.9% next year and 2.1% in 2025. ECB policymakers also said they were closely monitoring the current market tensions and are ready to respond whenever necessary to maintain financial stability in the common bloc.

Banking stocks ended the session higher by around 1.2% on Thursday, following the ECB’s rate decision.

Credit Suisse’s stock, which had fallen sharply on Wednesday, rebounded on Thursday to close the session with more than 19% gains, after Swiss National Bank announced plans to provide a loan.

Investors also assessed other economic reports, which showed Spain’s trade deficit shrinking to €3.96 billion in January, from €6.52 billion in the year-earlier period. Italy’s annual inflation rate eased to 9.1% in February, versus a preliminary reading of 9.2%.

The STOXX Europe 600 Index gained 1.19% to close at 441.64 on Thursday, after swinging between gains and losses during the session following the ECB’s rate announcement.

London’s FTSE 100 rose 0.89% to settle at 7,410.03, while Germany’s DAX 40 and France’s CAC 40 added 1.57% and 2.03%, respectively.

What to watch: Markets await the release of inflation data from the Eurozone today. The region’s consumer price inflation is expected to decline to 8.5% in February, from 8.6% in the previous month.

The markets today

Crude oil will be in focus today ahead of the Baker Hughes crude oil rigs data

Context: Crude oil prices settled higher on Thursday, after falling to near a 15-month low earlier during the session.

Details: Prices for crude oil fell sharply on Wednesday amid rising concerns related to banks globally.

Oil prices rebounded on Thursday, backed by optimism around a recovery in demand from China. The OPEC (Organization of the Petroleum Exporting Countries) recently increased its outlook for oil demand growth from the Asian country for 2023, following the relaxation of strict covid-19 restrictions.

The IEA (International Energy Agency) also issued a bullish forecast for oil demand driven by the resumption in air travel.

Saudi Arabia energy minister Prince Abdulaziz bin Salman said the OPEC+ group would continue with its earlier output cuts announced in October until the end of the year.

On Thursday, oil prices were boosted by a broader recovery in financial markets after Swiss National Bank announced plans to provide a loan to Credit Suisse.

The weakness in the US dollar also lent support to oil prices on Thursday, making dollar-denominated oil cheaper for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.2%.

WTI crude oil for April delivery gained 74 cents to $68.35 per barrel on Thursday, after falling below $70 per barrel for the first time since December 20, 2021. Brent crude for May delivery added $1.01 to close at $74.70 per barrel. Both oil contracts had tumbled to near 15-month lows earlier in the session.

In other energy trading, wholesale gasoline for April delivery gained 6 cents to $2.50 a gallon, while April heating oil added 4 cents to $2.64 a gallon and April natural gas rose 7 cents to $2.51 per 1,000 cubic feet on Thursday.

What are expectations: Traders await the release of crude oil rigs data from Baker Hughes today. The number of active US rigs drilling for oil fell by 2 to 590 in the week ended March 10, following a decline of 8 oil rigs in the prior week.

Other Markets: US trading indices closed higher on Thursday, with the Dow Jones index and S&P 500 and Nasdaq 100 up by 1.17%, 1.76% and 2.69%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD  – 1.0610 and 1.0616 Positive
GBP/USD – 1.2105 and 1.2112 Positive
WTI Crude Oil – 68.10 and 68.42 Positive
Nasdaq 100  – 12555.48 and 12601.96 Positive
DAX 40  – 14912.97 and 15044.64 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0613, 0.01%) Dow ($32,452, -0.10%) Brent ($74.41, 0.1%)
GBP/USD (1.2106, -0.03%) S&P500 ($3,991, -0.09%) WTI ($68.31, -0.1%)
USD/JPY (133.55, -0.15%) Nasdaq ($12,705, -0.08%) Gold ($1,924, 0.1%)

What else to watch today

Italy’s balance of trade and construction output, Central Bank of Russia’s interest rate decision, India’s foreign exchange reserves, Brazil’s unemployment rate, IBC-Br index of economic activity, Canada’s raw materials prices, foreign investment in Canadian securities and producer price inflation, US industrial production, manufacturing production, capacity utilization, University of Michigan consumer sentiment and CB leading index, as well as China’s foreign direct investment.


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