US Market Update: Key Takeaways – JP Morgan in the spotlight

May 2, 2023

JPMorgan is poised to acquire First Republic Bank, representing the second-largest bank failure in US history. The FDIC and JPMorgan will share the burden of losses and any potential recoveries on First Republic’s loans. Net bearish positioning on the US dollar against major currencies has reached its highest level since June 2021, as traders anticipate the Fed to pause monetary policy after a 25bps rate hike this week, with rate cuts expected by the year-end. The annual growth in US crude output has significantly decreased from previous years; combined with climate change initiatives and the rise of electric vehicles, this could result in higher prices for consumers and stronger gains for O&G shareholders.

JP Morgan has reached an agreement to acquire First Republic Bank, which was seised by the FDIC following its failure. The acquisition encompasses £173 billion in loans, £30 billion in securities, and £92 billion in deposits. In other economic news, the Employment Cost Index (ECI) increased by 1.2% for the first quarter, while compensation costs rose by 4.8% annually

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The Fed’s preferred inflation gauge, the PCE Price Index, indicates that inflationary pressures persist, with PCE and core PCE rising 4.2% and 4.6% YoY, respectively. Consequently, net bearish positioning on the US dollar against major currencies has reached its highest level since June 2021, as traders foresee a pause in the Fed’s monetary policy following this week’s 25bps rate hike and potential rate cuts by the end of the year.

“The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge.” – Paul Tudor Jones

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