MARKET WRAPS
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Texas Manufacturing Outlook Survey for March
Today's Top Headlines/Must Reads:
- First Citizens Acquires Much of Failed Silicon Valley Bank
- Deutsche Bank Shares Rise as Europe's Lenders Rally
- Microsoft, Google, Amazon Look to Generative AI to Lift Cloud Businesses
- The Paper-Thin Steel Needed to Power Electric Cars Is in Short Supply
- North Korea Fires Two Short-Range Missiles Ahead of Arrival of U.S. Aircraft Carrier
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Opening Call:
Stock futures were firmer on Monday as traders welcomed waning signs of banking sector stress.
Europe's Stoxx 600 Banks index was up as Deutsche Bank, source of Friday's worries, rebounded 5%.
News that First Citizens has agreed to buy the deposits and loans of failed Silicon Valley Bank is also helping underpin sentiment.
"With Silicon Valley Bank's deposits and loans now housed in longer term accommodation in the U.S., a calm of sorts has descended on the banking sector...Shunting parts of the failed bank off to a new owner may give the regulator more capacity to deal with problems still threatening to pop up elsewhere, particularly with U.S. regional banks," Hargreaves Lansdown said.
Stocks to Watch
Berkshire Grey said it agreed to a merger deal with SoftBank Group and its affiliate. Shares rose 18% to $1.35 in after-hours trading.
Deutsche Bank's Frankfurt-listed shares rose about 3.4%, recouping some of Friday's losses, as fears over spreading turmoil in European banking showed signs of easing.
First Citizens Bancshares agreed to buy big pieces of Silicon Valley Bank, following the latter's collapse more than two weeks ago. First Citizens stock was about 12% higher premarket in low volumes.
First Republic Bank shares, which have been highly volatile recently, surged 24% premarket.
Iovance Biotherapeutics said it completed its license application submission for lifileucel. Shares rose 13% to $6.24 in after-hours trading.
Motorsport Games said it needs to raise additional funding to continue operating. Shares dropped 10% to $6.01 in after-hours trading.
Novartis reported positive trial data for its eagerly awaited breast-cancer treatment, Kisqali. Switzerland-listed shares in Novartis, and the company's New York-listed ADR's, both rose about 6%.
Forex:
The dollar edged higher as its safe-haven status gained ground amid concerns over stress in the banking sector, Unicredit Research said.
"This explains the difficulty USD/JPY has had in breaking below the key 130 baseline," Unicredit said.
EUR/USD rejected the peak of 1.0933 hit just after the Federal Reserve's meeting last Wednesday and has dropped back toward 1.07, it said, adding that is mostly because the selloff in European stocks was heavier than U.S. stocks and the German-U.S. yield spread has moved back in favor of the dollar.
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Sterling may be moved by comments from Bank of England Governor Andrew Bailey later but should rapidly default to being driven by external factors, ING said.
"Essentially, GBP/USD is a USD story and EUR/GBP is a EUR story," ING said.
GBP/USD could rise to 1.2500 this quarter but EUR/GBP could rise to 0.8900 as the euro looks marginally more attractive than sterling, it said.
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Eurozone data on Friday could show headline inflation eased considerably in March but this should have a limited impact on the euro, Unicredit Research said.
"In terms of the data impact on EUR/USD, a sticky core figure will probably more than offset the sharp drop we expect in the headline rate and prevent a new fall."
Unicredit expects eurozone headline inflation to ease to an annual rate of 7.0% in March from 8.5% in February but core inflation to rise to 5.7% from 5.6%.
Bonds:
High-quality fixed income assets offer attractive opportunities given decent yields and the scope for capital gains, should an economic slowdown occur, UBS Global Wealth Management Investment Research said.
It prefers bonds relative to equities, and prefers high-grade government bonds, as well as investment grade and sustainable bonds relative to high-yield bonds.
The wealth manager also sees value in emerging market bonds. "Investors who actively manage their bond portfolios have the potential to take full advantage of the opportunities," it said.
UBS GWM recommends investors to lock in attractive yields.
"F or investors holding cash, or those with upcoming bond maturities, we advise against waiting for the 'final rate hike' before locking in current yields."
As the negative effects of the interest-rate rises so far become more apparent, UBS GWM believes that markets will increasingly start to price in the possibility of future interest-rate cuts.
Energy:
After recent steep declines due to the banking sector turmoil, oil markets appear to have stabilized, with the price picking up on fresh concerns about Russian supplies.
Russia said it would station tactical nuclear weapons in Belarus, refocusing minds on the threats to Russian supplies from geopolitical tensions, analysts said.
"OPEC supply remains constrained, but there are considerable uncertainties around the outlook on Russia," Fitch Solutions said.
Metals:
Copper prices wavered in early London trade as traders balanced hopes for Chinese demand against concerns about global economic growth.
Positive signs for China's property sector so far this year could point to strong demand for copper, and the country also plans to boost spending on its power grid, which could also lift China's huge appetite for the red metal, the Commonwealth Bank of Australia said.
Still, copper supply should rise faster than demand, clouding the outlook for prices, CBA noted.
"We think copper-supply growth will still outpace copper-demand growth in 2023. That should weigh on copper prices through 2023, particularly if the banking crisis escalates."
Graphite
Graphite demand could rise by a compound annual growth rate of 27% to 2030, pushing prices as much as 50% higher than current levels, Macquarie said.
Graphite, currently used in all lithium-ion battery chemistry, should be in a market deficit by 2025, it added.
While graphite supply is expected to double over the next decade, led by Africa, "given demand growth, we believe a [more than] 300% increase in production is required to balance the market," Macquarie said.
It forecast the price for natural graphite fines--sub100 mesh--to rise from $800/metric ton in 2023 to $850/t in 2024 and to more than $1,000/ton by 2026.
Iron Ore
UBS is cautious on iron ore in the short term, expecting China's recovery to be led by consumption rather than construction. It is also wary on prices further out.
In the medium term, rising supply from Australia and Brazil and weak demand because of steel scrap growth are likely to be price headwinds, UBS noted.
"We believe China's steel demand has peaked and will decline medium-term as China drives its decarbonization agenda."
UBS forecast iron-ore prices will average about $103/metric ton in 2023, and fall to roughly $75/ton in the medium term, around 2025-27.
TODAY'S TOP HEADLINES
First Citizens Acquires Much of Failed Silicon Valley Bank
First Citizens Bancshares Inc., one of the nation's largest regional banks, is buying big pieces of Silicon Valley Bank more than two weeks after the lender's collapse sent tremors through the banking system.
The Federal Deposit Insurance Corp. said First Citizens is acquiring all of Silicon Valley Bank's deposits, loans and branches, which will open Monday morning under the new ownership.
Deutsche Bank Shares Rise as Europe's Lenders Rally
Deutsche Bank AG led Europe's bank shares higher in early trade Monday, recouping some losses after a selloff at the end of last week.
However, banking turmoil might not yet be over, some analysts warned.
Microsoft, Google, Amazon Look to Generative AI to Lift Cloud Businesses
Tech giants are touting new artificial intelligence tools that they say will revolutionize work, learning and creativity. They also have something else in mind: rejuvenating sales in their cloud-computing businesses.
The three largest cloud companies-Amazon.com Inc., Microsoft Corp. and Alphabet Inc.'s Google-have put the potential of new, so-called generative AI at the center of their sales pitches to try to capitalize on the explosion in interest in applications like the viral chatbot ChatGPT.
Uber Eats to Take Down Thousands of Virtual Brands to Declutter the App
Uber Eats is taking thousands of online-only brands off its app this week out of concern that the platform is getting clogged by restaurants listing multiple delivery options with different names but the same menu.
So-called virtual brands-delivery businesses without physical storefronts-mushroomed on delivery apps during the pandemic, becoming a lifeline for eateries who used their empty kitchens and idle staff to test new ideas and make up for lost sales.
Elon Musk Offers Employees Stock Grants Valuing Twitter at About $20 Billion
Elon Musk said Twitter Inc. employees will receive stock awards based on a roughly $20 billion valuation, less than half of the $44 billion price he acquired the company for last year, according to an email viewed by The Wall Street Journal.
Mr. Musk in the note to staff said he was optimistic about the social-media company's future. "I see a clear, but difficult, path to a >$250B valuation," meaning stock granted now would be worth 10 times more, he said.
Telehealth Apps Sharing Consumer Data Draw FTC Crackdown
The Federal Trade Commission is cracking down on the data-sharing practices of telehealth companies, focusing on widespread uses of data that many companies in the industry have failed to disclose to users.
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03-27-23 0621ET
