We saw a tepid start to the trading week on the major Asian bourses today, with traders still ascertaining the state of play regarding the credit-sturdiness or otherwise of the global banking system.
Deutsche Bank is the latest big name to give the market the jitters, with alarm bells ringing following sharp price action in its credit default swaps.
This is keeping financial stocks pressured with traders on the lookout for any other potential pockets of trouble in the global financial system.
And, given the recent gains of global equities (including the weekly gains posted by US indices last week), it’s fair to say that traders are putting on a brave face despite no assurances that we have seen the last of the banking sector woes.
Looking at the economic calendar this week, the one that stands out as being the key event risk is the US Core PCE data (due on Friday in the US). With the US Fed currently balancing its fight against inflation while also trying to restore confidence to the banking system, any read on US price pressure will be watched like a hawk by investors in attempting to assess whether the Fed has reached the peak of the current rate-hike cycle.
In currency market flows, the US dollar is finding buyers on safe-haven flows while the Euro and Sterling succumb to questions over the fragility of EU banks.
Meanwhile, the path of least resistance for the AUD at present is to the downside, with the currency struggling to attract buyers with risk-aversion still the prevailing them.
During Asian trading hours on Monday, the AUDUSD rate was trading around the 0.6650 level and below, with traders eying the upcoming Australian retail sales data on Wednesday for further directional queues for the Aussie Dollar.
Gold eases from recent highs
Elsewhere, while gold has eased from its recent highs, the precious metal is having no trouble finding buyers on price dips and remains well supported amid the global banking troubles.
However, the solid USD performance of late is keeping a lid on the gold price upside for now (as a stronger USD makes gold more expensive to buy for foreign investors). Gold futures were last seen trading at US$1976 during Asian trading hours on Monday.
Oil struggles to gain traction
Meanwhile, oil is struggling to gain traction while the banking sector struggles continue to dominate the headlines, with the global growth and demand picture looking uncertain at present. WTI futures are having difficulty getting past the US$70 level and were last seen trading at US$69.25 during the Asian session.
Market insights and analysis from Tim Waterer, Chief Market Analyst at Kohle Capital Markets
