Markets:

  • Gold up $10 to $1999
  • US 10-year yields down 13 bps to 3.38%
  • WTI crude oil down $1.71 to $77.05
  • S&P 500 down 1.56%, Nasdaq down 1.9%
  • JPY leads, AUD lags

The death of US banking woes was premature.

Late yesterday, First Republic Bank reported that customers had pulled about $100 billion in deposits in March, far more than expected and only partially buffered by an emergency injection of $30 billion from large banks. Initially, the pain in the stock wasn't too bad but it worsened steadily in New York trade as the company offered no way forward except to stay it was pursuing opportunties. Reports said the government was concerned and that options were limited and that helped to send shares down 50% on the day.

The pain spread from there and dip-buyers were reluctant to step in ahead of mega-cap tech earnings. Still, direct contagion wasn't too bad with the regional bank index down 4.2%. Eyes will be on PacWest with earnings after the bell to see if deposit ouflows are contained to around 10% or worse like at FRC.

The risk aversion was intense and the bond market signalled that worries were real. Layered into that might have been comments in other earnings reports that inflation pressures are dwindling.

Also a factor was US data including a soft consumer confidence report and Richmond Fed. That was contrasted by good new home sales data but right now the market is much more worried about a Q3-Q4 recession.

The yen was strong across the board as the market priced down a May 3 rate hike to 75% from a near-certainty. The dollar was higher otherwise, including strong gains against the Australian dollar and loonie. Oil and copper were hit hard on soft global grrowth sentiment.

Watch out for earnings after the bell and early tomorrow.

FX news wrap April 25