The relief rally continues in the markets following the Credit Suisse fallout, with a broadening rally across various asset classes. European banks UBS and Deutsche Bank led the rally on hopes of avoiding further contagion. US equities went into a “risk on” mode, with beleaguered regional banks and unprofitable tech firms seeing a boost. Defensives underperformed while energy, financials, and discretionary sectors led the rally. The S&P500 broke through 100- and 200-day MVA’s comfortably and is close to the 50-day MVA at 4012. The rally seems to have been supported by real money buying, with pension funds and endowments putting cash to work in US equities.
Commodity markets have seen a shift from gold to oil and copper has regained $4.00lb, with the physical commodity complex remaining resilient. Bill Ackman of Pershing Square made some interesting points about the Fed’s pending policy decision, with many believing the Fed needs to raise rates to prevent further liquidity problems at US banks. In the upcoming Fed meeting, it is forecasted that the Fed will raise rates by +25bp and simultaneously lower the forward dot plot to stabilize risk assets.
The RBA minutes of the March 7th board meeting showed “common sense” as the RBA is in “pause” mode. It is believed that the Fed’s terminal rate is the 4.75% to 5.00% it is likely to reach tonight. Global investors should take advantage of the pullback in tier 1 Oil/Gas producers, starting with the global and domestic energy complex.
