27 April 2023
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US durable goods orders beat expectations

By Edward Bell

Financial markets turned weaker again overnight as anxiety spreads over what will happen to First Republic Bank as it has not been able to sufficiently improve its finances in the weeks since turmoil first hit the US banking sector. According to press reports, First Republic may lose access to emergency Fed support, such as the discount window, unless it is shored up by private backers. The Fed held firm through the collapse of Silicon Valley Bank in March and hiked rates by 25bps in March. The stress around First Republic is about one week ahead of the next FOMC where we still expect another 25bps hike from the Fed.

US durable goods orders rose by 3.2% in March, much stronger than markets had been expecting. The headline number was supported by a surge of new aircraft orders for Boeing, however. The non-defence capital goods ex-aircraft component dropped 0.4% in March which will send a chill down the industrial production element of GDP calculation. Sluggish manufacturing activity has been showing up in the data more and more even as many other segments of the US economy appear to hold up relatively well.

Today’s Economic Data and Events

  • 13:00 EC Consumer confidence April
  • 15:00 TU One-week repo rate: forecast 8.5%
  • 16:30 US Initial jobless claims Apr 22: forecast 248k
  • 16:30 US GDP Q1 annualized: forecast 2%
  • 18:00 US Pending home sales Mar: forecast 0.7%

Fixed Income

  • US Treasuries endured a choppy day of trading with market attention focusing on whether First Republic Bank will be the next financial institution to suffer in the US. Yields on the 2yr UST oscillated in a 15bps round trip, ultimately closing near flat at 3.9509%. The 10yr UST yield pushed higher, closing up 5bps at 3.4485%.
  • The UAE will establish a dirham-denominated sukuk curve with maturities of 2, 3 and 5yr issues with a 10yr sukuk to follow. The sukuk curve will “contribute to the implementation of the new Dirham Monetary Framework” according to UAE central bank governor Khaled Mohamed Balama.
  • Emerging market bonds turned slightly lower according to a broad USD-denominated index. In local markets, Turkish 10yr yields rose 16bps to 11.9% while South African 10yr yields fell 1bps to 11.376%.


  • The US dollar closed weaker against most peers overnight as anxiety that another bank in stress could forestall the Fed from tightening policy any further weighed on the dollar. EURUSD recovered some recent losses, closing up 0.6% at 1.1041 while GBPUSD added about 0.5% to settle at 1.2469. USDJPY closed about flat at 133.67.
  • Commodity currencies swung lower amid a broader risk-off tone. USDCAD edged slightly higher while AUDUSD fell 0.4% to 0.6603 and NZDUSD fell by 0.3% to 0.6117.


  • European equity markets were under pressure yesterday as some weak earnings weighed on sentiment. The composite STOXX 600 dropped 0.8%, with the DAX and the FTSE 100 both losing 0.5%, and the CAC ending the day 0.9% lower.
  • In the US, the NASDAQ managed to record a 0.5% gain, buoyed by some strong tech earnings, but the S&P 500 (0.4%) and the Dow Jones (0.7%) both ended down, with concerns around the banking sector to the fore once more.
  • Locally, the DFM dropped 0.5% while the ADX closed up 0.3%.


  • Oil prices dropped heavily overnight, down 3.8% in the Brent market to USD 77.69/b while WTI fell by 3.6% to USD 74.30/b. Both contracts have now given up all the gains they had made when OPEC+ cut output earlier this month. Anxiety over dropping refinery demand (run cuts) is feeding into the market though whether the cuts actually materialize is another question.
  • Crude inventories in the US dropped by 5m bbl last week while gasoline stockpiles also fell. US oil production declined to 12.2m b/d, down 100k b/d while product supplies rose by almost 900k b/d.

Written By

Edward Bell Head of Market Economics

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