Daily Market Outlook, March 27, 2023

Markets Avoid Another Weekend Meltdown, As SBV Is Acquired

Asian equities start the week in a subdued fashion following Friday's reversal on Wall Street, market concerns around European banking names have been allayed as the weekend passes without any significant negative news flow. First CitizensBancshares have agreed to acquire Silicon Valley Bank assets and deposits, the more constructive narrative for the banking sector has also provided support to Deutsche Bank whose stock was trading with near double digit losses on Friday but is opening in the green this morning. The Hang Seng and the Shanghai Comp were both negative on the session despite the PBoC's RRR cut taking effect today.

The data docket for the week ahead will have investors once again focusing on inflation with data from the US, Eurozone, Japan and Australia, as well as latest PMI readings from China. In the UK while it is likely too early for the recent global banking concerns to be reflected in the BoE’s money and credit data, domestic investors will have the latest read on Q4 GDP set for release on Friday in the UK and Thursday in the US, with markets expecting UK GDP to flatline while the US print should confirm a 2.7% level of activity for the final quarter of 2022. Stateside the main event outside and banking news flow this week will be the Fed’s preferred inflation gauge, the PCE deflator due for release on Friday, once again investors will be parsing the data for signals that the recent disinflationary signs were driven by the unusual weather witnessed at the beginning of the year or will the number confirm that further work from the Fed will be required to tackle persistent inflation pressures, markets are expecting the headline PCE deflator to fall to 5.2% in February from 5.4% in January, while the core figure excluding energy and food prices is expected to show and uptick of 0.5% leaving the annualised number at 4.8%, if confirmed this will leave officials with the conundrum of battling inflation while at the same time walking the fine line of maintaining market stability amidst the landscape of banking sector fragility. This evening UK investors will eye a speech from BoE Governor Bailey set to address and audience at the London School of Economics in a speech titled “understanding The UK economy” it is likely that UK governor will reiterate the positivity from last weeks post rate decision press conference, during which he confirmed a belief that the UK economy was looking ‘considerably better’