Swiss National Bank released a statement about Credit Suisse; Dow and S&P 500 collapse due to the Credit Suisse crisis, Sell-off of European banks led by Credit Suisse, and Flight to safety bid sending Treasury yields lower.
GLOBAL CAPITAL MARKETS OVERVIEW, ANALYSIS & FORECASTS:
Author: Dr. Alexander APOSTOLOV (researcher at Economic Research Institute at BAS)
The Dow closed down more than 250 points on Wednesday, the S&P 500 lost nearly 0.7 percent, and the Nasdaq 100 edged lower after turmoil at Credit Suisse added to market jitters, reigniting concerns over the health of the banking sector. Concerns. Credit Suisse tumbled as much as 31% on the day, a day after the Saudi National Bank ruled out increasing its stake after it announced it found "significant flaws" in its 2022 and 2021 financial reporting process, causing several European banks to suspend trading. In the U.S., First Republic Bank and Pacific Western Bank fell 21.4 percent and 12.9 percent, respectively, leading to losses among regional banks. On the economic front, the Labor Department's PPI report showed headline and core inflation slowed more than expected in February, opening the door to a possible pause in the Fed's tightening cycle.
Canada S&P/TSX composite index fell 1.6% around 19,370, its lowest level since the start of the year, under pressure from heavyweight banks, energy producers, and miners. The lender traded in Toronto after Credit Suisse's biggest shareholder, Saudi National Bank, ruled out further investment to bolster the bank's "substantial weaknesses," alleviating concerns about global banking instability and sparking a sell-off in financial stocks. Significant losses were recorded. TD Bank and BMO fell 1.7 percent and 1.9 percent, respectively. Widespread fears of bank failures also forced crude prices to 15-month lows, costing the energy sector 5.4%. A rise in gold prices failed to support gold miners, with base metals shares falling 6.1 percent.
European shares fell on Wednesday, with the STOXX 600 down 3% to its lowest level since Jan. 3 and the Stoxx Bank Index down nearly 8%. Credit Suisse tumbled 24% to a record low after major shareholder the National Bank of Saudi Arabia ruled out further capital injections into the troubled lender, a day after it revealed that it had uncovered new financial risks during its financial reporting for 2022 and 2021. "Significant Deficiency." Domestically, Germany's DAX fell more than 3 percent to a two-month low, with Deutsche Bank down 9.4 percent and Commerzbank down 8.9 percent. Elsewhere, Societe Generale fell 12.2 percent, and BNP Paribas fell 10.1 percent. In other corporate news, Inditex shares fell about 5% despite a 27% rise in net profit in 2022, while H&M, the world's second-largest fashion retailer, fell after reporting a rise in net sales for December-February—8%. The CAC 40 plunged 3.6% to close at a two-month low of 6,886 on Wednesday, in line with regional and global peers. Fears of a banking crisis reignited after Credit Suisse's largest investor said it could not provide more financial aid to the Swiss lender. The financial sector was the hardest hit, with shares in Societe Generale (-12.2%), BNP Paribas (-10.1%), Crédit Agricole (-5.2%), and AXA (-5.1%) falling sharply. The exceptions were defensive stocks such as Orange (+0.6%) and Sanofi (+0.9%). Locally, France staged an eighth day of strikes and protests against President Emmanuel Macron's plan to raise the retirement age from 62 to 64. On the data front, the latest CPI figures showed that France's CPI was revised up to 6.3% from an initial estimate of 6.2%, with the Consolidated index hitting a record high of 7.3% versus an initial assessment of 7.2%. The FTSE MIB fell 4.6% to a two-month low of 25,565 on Wednesday, its worst session since June 2022, as banks underperformed their European peers as banks took a fresh hit, while Banks make up a large portion of Milan's benchmark stock index. Major lender UniCredit tumbled 9%, while Intesa Sanpaolo, Finecobank, and Banco BPM fell more than 7% after the Saudi National Bank declined to increase support for the financial crisis. Investment from struggling Credit Suisse pressures the sector as deposit outflows lead to the collapse of big U.S. banks. The industry was also pressured by expectations that the European Central Bank could announce a faster pace of quantitative tightening at tomorrow's monetary policy decision. However, investors eased their belief in a 50 basis point hike. Meanwhile, energy producers closed more than 5.3 percent higher as oil prices fell to 15-month lows on concerns about financial instability. The IBEX 35 plunged 4.3% to 8759 on Wednesday, its lowest in nearly two months and in line with European peers as the banking sector turmoil renews. The Spanish prime minister's optimism failed to convince the market of the country's robust and resilient financial system, with shares held by large lenders Banco Sabadell (-10.4%), BBVA (-9.6%), Banco Santander (-6.8%), Caixabank (-6.7%) and Bankinter (-6.4%) all down. The losses came after Credit Suisse hit an all-time low. The body's main shareholder, the Saudi National Bank, has ruled out further injections even if more liquidity is needed. Also weighing on investors was the prospect of an ECB rate hike on Thursday. Meanwhile, Inditex fell 5.1% after publishing record quarterly results but signaling higher investment spending. Iberdrola was the only player, up 0.1%.
London stocks posted their worst one-day performance since March 2020 on Wednesday, dragged down by losses in energy, materials, and financials, with the benchmark FTSE 100 down 4% to close just 7,300 points away. Concerns about the health of the global financial system rattled investors again. Shares in Credit Suisse tumbled more than 25% after its largest shareholder, the National Bank of Saudi Arabia, ruled out the possibility of more aid leading to the suspension of several European banks. Elsewhere, investors digested UK Chancellor of the Exchequer Jeremy Hunt's budget. The chancellor pledged to halve inflation, reduce debt and boost economic growth, saying Britain would not enter a technical recession this year and that inflation could fall to 2.9% by the end of 2023. Among individual stocks, Prudential was the biggest loser on the FTSE 100, down around 12%. Shares in major mining company Glencore plunged more than 10%. Barclays and Standard Chartered were among the biggest losers, falling 9% and 8%, respectively.
The ruble-based MOEX Russia index extended early losses to close 1.2% lower at 2,262 on Wednesday, erasing yesterday's gains under pressure from commodity-linked stocks. Energy commodities and base metals fell sharply in the session after the National Bank of Saudi Arabia said it would not provide more support to Credit Suisse during a "substantial weakness" period, adding to woes in global financial markets. Oil major Rosneft slumped 1.8 percent, leading losses among energy producers, with oil prices down more than 5 percent. In addition to lowering profits for oil companies, the collapse in energy prices threatens the entire Russian economy as Moscow relies heavily on energy export revenues to fund its operations. At the same time, its budget deficit widened to a record high this year. Miners and metallurgists also posted losses as falls in base metals offset gains in gold prices.
Hong Kong shares rose 291.91 points, or 1.52 percent, to close at 19,539.87 on Wednesday, a day after the Hang Seng Index fell to a more than three-month low. Stocks rallied strongly on Wall Street as fears of contagion from the banking crisis eased. Meanwhile, U.S. inflation data aligned with consensus and boosted hopes that the Federal Reserve may opt for a modest rate hike when it meets next week. Traders welcomed official data showing China's economy started to recover at the start of the year, with retail sales returning to growth. At the same time, factory activity picked up slightly less than expected. The technology sector soared 2 percent, with Baidu Inc. up 3.6 percent after OpenAI announced it had begun releasing an artificial intelligence model called GPT-4. Financials, consumer, and real estate stocks also posted strong gains. Innovent Biologics and Giant Biogene Hlds. They soared 10.2% and 9.2%, respectively, followed by Miniso Group (5.8%), Alibaba Health International (5.6%), and China Construction (4.6%)
China Shanghai Composite rose 0.6 percent to close at around 3,265 points. In comparison, the Shenzhen Composite rose 0.7 percent to close at 11,500 points, erasing the previous session's losses and tracking Wall Street's gains overnight as investors looked to The worst of the collapse of Silicon Valley Bank and Signature Bank is over. An in-line U.S. inflation report also reassured investors, who are betting the Federal Reserve will raise interest rates modestly next week. Investors also reacted to mixed economic data from China and the People's Bank of China's decision to keep the one-year medium-term lending facility rate at 2.75%. Technology stocks led the gains, with strong gains in Semiconductor Manufacturing (3.1%), China Wafer Level (5.5%), China Satellite Communications (1.8%), HKUST Xunfei (1.5%), and Hangzhou Hikvision (2.8%).
The Japan Nikkei 225 edged up 0.03% to close at 27,229. InTheroader Topix gained 0.65% to close at 1,960 on Wednesday, snapping a three-day slide, with bank stocks leading a rebound after similar moves on Wall Street. Investors hope the worst is over from the collapse of Silicon Valley Bank and Signature Bank. An in-line U.S. inflation report also reassured investors, who are betting the Federal Reserve will raise interest rates modestly next week. Domestically, the minutes of the Bank of Japan's January meeting showed that members reiterated the need to maintain a sustainable and stable ultra-loose policy and said it would take time to achieve the 2% inflation target sustainably and soundly. Financials led gains, with gains in Mitsubishi UFJ (4.7%), Sumi,tomo Mitsui (3.1%) and Mizuho Financial (2%).
The India BSE Sensex erased early gains to close 350 points lower at 57,555 on Wednesday. It fell to its lowest level in five months for the fifth straight session, as turmoil in the U.S. financial sector weighed on Indian stocks. Concerns over major banking contagion have dented investor confidence in lenders' stability, pushing IndusIndian Bank, State Bank of India, Axis Bank, and HDFC Bank down 1%-2%. Meanwhile, the latest data showed a sharp drop in trade activity, with imports and exports contracting sharply in February, underscoring the impact of rising living costs and interest rates. Elsewhere, higher-than-expected U.S. core inflation data weighed on policy-sensitive tech and automakers, with TCS and Maruti Suzuki down more than 0.5 percent.
The Australia S&P/ASX 200 rose 0.8% to close above 7,060 on Wednesday, rebounding from more than two-month lows led by tech and banks after a similar move on Wall Street as investors looked to Silicon Valley. The worst of the fallout from bank and signature bank failures is over. An in-line U.S. inflation report also reassured sentiment, with investors betting on a small rate hike by the Federal Reserve next week. Locally, data on Tuesday showed Australian consumer confidence remained at a record low in March amid concerns about inflation, interest rates, and the broader economy, while business confidence fell to a three-month low in February. The technology sector led gains by Computershare (2.9%), Block Inc (4.1%), and Xero (2.6%). The "big four" banks were also up, namely CBA (0.3 percent), ANZ Group (1 percent), Westpac (0.7 percent), and NAB (0.9 percent).
The New Zealand ANZ 50 rose 30 points, or 0.25%, to close at 11,625 around midday Wednesday, trying to shake off a near 3-1/2-month low in the previous session, after strong gains on Wall Street on Tuesday, against Bank of America Concerns over industry impact eased. Meanwhile, US CPI data met market expectations, rising 0.4% every month and 6% annually. However, the figure was slightly lower than January's inflation index, which was 0.5% and 6.4%, respectively. Financials jumped nearly 2% after the S&P 500 bank index rebounded from its biggest one-day sell-off since June 2020. Healthcare, retail trade, and consumer also rose after falling in the previous session. Among individual stocks, Ryman Healthcare rose 3 percent, followed by Fletcher Building (1.8 percent), Briscoe Group (1.7 percent), and Fonterra Co-Op (1.2 percent). Traders are now awaiting a slew of Chinese economic data later in the day. As China emerges from strict outbreak controls, industrial output and retail sales are expected to increase.
Brazil's Ibovespa stock index closed Wednesday down 0.2% around the 102,600 level, reaching levels not seen since July 2022 during the session. The Ibovesba index trailed its global counterparts as renewed pressure on the financial sector was triggered by a sharp decline in Credit Suisse shares. Also, while the impact of SVB's collapse is still unclear, US economic experts say they don't believe the bank's failure will cause a domino effect similar to the one that led to the 2008 financial crisis. Nationwide, the head of Brazil's Senate economic affairs committee said on Tuesday that he does not see tax reform approved this year, countering the government's optimism in changing the tax system quickly to help spark growth. Economic. On the corporate front, CVC Brasil shares tumbled 5.2% after posting losses in the fourth quarter.
REVIEWING THE LAST ECONOMIC DATA:
Reviewing the latest economic news, the most critical data is:
- US: The U.S. capital and financial account surplus were $183.1 billion in January 2023, widening from $26.7 billion the previous month. This was the highest figure since January 2022, with net foreign private inflows of $171.24 billion, compared with net foreign official inflows of $11.9 billion. During this period, foreign residents increased their holdings of long-term U.S. securities, with net purchases of $31.7 billion, including net assets of $85.0 billion by foreign investors and net assets by foreign official institutions of $53.3 billion.
- US: U.S. stocks pared some losses in the afternoon after reports that Swiss authorities and Credit Suisse discussed ways to stabilize the bank. Shares in Credit Suisse slumped 31% earlier in the day, a day after the Saudi National Bank ruled out adding to its stake after it announced it found "significant deficiencies" in its 2022 and 2021 financial reporting process. Trading at several European banks was suspended due to the possibility. On the economic front, the Labor Department's PPI report showed headline and core inflation slowed more than expected in February, opening the door to a possible pause in the Fed's tightening cycle. Swap prices show investors expect the U.S. central bank to cut rates by 100 basis points by the end of the year from their expected peak in May. After opening more than 600 points lower, the Dow pared losses to about 300facts, while the S&P 500 fell 0.8% and the Nasdaq moved into positive territory.
- US: In February 2023, U.S. retail sales fell 0.4% month-on-month, compared with market forecasts for a 0.3% decline, following a 3.2% increase in January, the largest gain since March 2021. The largest decreases were in furniture stores (-2.5%), food service and drinking establishments (-2.2%), miscellaneous retailers (-1.8%), motor vehicle and parts dealers (-1.1%), clothing stores (-0.8%) %), sales at gas stations (-0.6%), department stores (0.5%) and electronics (0.3%). Excluding autos, sales fell 0.1%, and excluding gasoline and cars, sales were flat. On the other hand, so-called core retail sales, which exclude automobiles, gasoline, building materials, and food services, rose 0.5 percent and have more to do with the consumer spending portion of gross domestic product.
- US: In February 2023, the producer price of final demand in the United States fell by 0.1% month-on-month, and the market expected a rise of 0.3%. Commodity prices fell 0.2% after rising 1.2% in January, namely food (-2.2%), including eggs (-36.1%); indexes for residential natural gas, fresh and dried vegetables, diesel fuel, domestic heating oil, and basic organic chemicals also declined. Also, services costs fell 0.1%, unchanged from the previous month. Margins in final demand trade services fell 0.8 percent, while prices for final demand transportation and warehousing services fell 1.1 percent. In contrast, the index for absolute demand services minus trade, transportation, and storage rose 0.3%.
- US: The latest report from the U.S. Energy Information Administration showed that U.S. crude oil inventories rose by 1.55 million barrels in the week ended March 10, beating market expectations of 1.188 million barrels. On the other hand, crude inventories at the Cushing, Oklahoma, delivery hub fell by 1.916 million barrels, the biggest drop since May 2022. Elsewhere, gasoline stocks fell by 2.061 million shares, the biggest decline since late 2022, beating estimates of 1.82 million shares. In addition, distillate stockpiles, which include diesel and heating oil, fell by 2.537 million, the biggest drop since October 2022, compared with forecasts for a smaller decline of 1.172 million.
- US: In January 2023, U.S. manufacturers and trade inventories fell 0.1% from the previous month after rising 0.3% in the last month, unchanged from market expectations. Shares of wholesalers fell (-0.4%, from 0.1% in December), while manufacturers' claims were whole. Meanwhile, retailers' inventories rose slower (0.2% vs. 0.4%). Business inventories rose 11.1 percent year-on-year in January.
- US: In March 2023, the US NAHB/Wells Fargo housing market index rose to 44 for the third consecutive month, a new high since September 2022, exceeding the market forecast of 40. The current selling conditions indicator rose to 49 from an upwardly revised 47, and prospective buyer traffic increased three percentage points to 31, a six-month high. On the other hand, sales expectations for the next six months fell to 47 from 48. "Although stress in the financial system has recently lowered long-term interest rates, which will help housing demand in the coming weeks, the cost and availability of housing inventory remains a key constraint for potential homebuyers," said NAHB Chief Economist Robert Dietz. .”
- UK: Chancellor of the Exchequer Jeremy Hunt pledged in his spring budget to halve inflation, boost growth and reduce debt. The government is providing a total of £94bn this financial year and the next, equivalent to an average of £3,300 per household, to support higher-cost families. In particular, the Energy Price Guarantee scheme will remain in place for another three months, as expected. The government is also providing additional support for public services, including £5 billion over the next two years for defense and national security priorities and £2 billion a year in defense spending for the remainder of the forecast period. As a result, according to the Office for Budget Responsibility, the UK economy will contract by 0.2% this year and grow by 1.8% in 2024; 2.5% in 2025; 2.1% in 2026; and 1.9% in 2027. In addition, inflation is expected to slow to 2.9% by the end of 2023 from 10.7% in last year's last quarter.
- EU: In January 2023, industrial production in the euro area rose by 0.7% from a month earlier, recovering partly from a revised 1.1% decline in December and beating market expectations for a 0.4% increase, as the output of intermediate goods increased by 1.5%. %, rebounding from a 2.7% plunge in the previous month. On the other hand, production of consumer non-durable goods (-2.1% vs. -2.3%), energy products (-0.8% vs. 3.4%), consumer durables, and capital goods (-0.2%, same as in December) fell. As a result, industrial production rose 0.9% year-on-year in January, beating the consensus for a 0.2% increase.
- IN: India's merchandise trade deficit narrowed to $17.43 billion in February 2023 from $18.75 billion in the same month last year, compared to market expectations of $19.0 billion. It was the smallest trade deficit since January 2022, with imports falling 8.2% to $51.31 billion as domestic demand weakened amid rising living costs and higher borrowing costs. Meanwhile, exports fell 8.8 percent to $33.88 billion, reflecting weak manufacturing activity as the global market was also hit by stubbornly high inflation and rising interest rates. As a result, imports rose 18.82% to $653.47 billion in April-February, while exports rose 7.55% to $405.94 billion.
- FR: France's annual inflation rate rose to 6.3% in February 2023 from 6% in January, the highest level since May 1985 and slightly above market forecasts of 6.2%, still well above the ECB's 2.0 percent target. The main upward pressure came from food (14.8% vs. 11.1%), especially fresh vegetables (23.3% vs. 12.0%) and fresh fruit (9.8% vs. 7.4%); manufactured goods (4.7% vs. 4.5%) and services (3% vs. 2.6%). On the other hand, energy costs fell (14.1% vs. 16.3%). Prices of petroleum products also fell (8.8% vs. 16.3%) due to lower prices for diesel (8.0% vs. 17.5), petrol (6.4% vs. 9.3%), and liquid fuels (14.0% vs. 28.7%). Core prices, which exclude volatile items such as unprocessed food and energy, rose to 6.1 percent in February from 5.6 percent in January. Consumer prices edged up 1% every month after increasing 0.4% the previous month. At the same time, the coordinated CPI rose by 1.1% month-on-month and 7.3% year-on-year.
- SW: Sweden's annual inflation rate soared to 12% in February 2023, the highest level since February 1991, slightly ahead of market expectations and January's 11.7% rise. Major upward pressure came from food, and non-alcoholic beverages (21% in January vs. 19.6% in January), higher prices for milk, cheese, eggs, and vegetables; housing and utilities (18.4% vs. 18.3%) due to home mortgages, Interest, and electricity prices rise. Additionally, costs accelerated for entertainment and culture (8.3% vs. 7.9%), clothing and footwear (8.9% vs. 7.4%), and furniture and home furnishings (11.2% vs. 12.9%). Consumer prices rose 1.1 percent monthly, reversing a 1.1 percent decline in January and beating expectations for a 0.9 percent gain.
- CN: In January-February 2023, China's total retail trade rose 3.5% from a year earlier, down from 1.8% in December, marking the strongest growth since August 2022. The turnaround underscores a recovery in consumption after Beijing abandoned strict coronavirus restrictions in December.
- CN: China's surveyed urban unemployment rate rose to 5.6 percent in February from 5.5 percent the previous month, the highest level since November. In 2023, the government aims to keep the unemployment rate at around 5.5% and create about 12 million new urban jobs.
- CN: In the first two months of 2023, China's fixed asset investment increased by 5.5% year-on-year to 5.36 trillion yuan, exceeding the market forecast of 4.4% and accelerating from 5.1% in 2022. Among industries, investments in the primary sector (1.5% vs. 0.2% in 2022) and tertiary sector (3.8% vs. 3.0%) are seeing faster growth. Meanwhile, investment in the second sector remained strong (10.1% vs. 10.1%), with activity growing in all subsectors, namely manufacturing (8.1%), mining (5.6%), agriculture, forestry, fisheries (4.2%) and utilities (25.4%).
- CN: From January to February 2023, China's industrial production will grow by 2.4% year-on-year, lower than the 2.6% expected by the market but faster than the 1.1% growth in the previous period. Across industries, manufacturing output accelerated, while mining and utilities both slowed. In manufacturing, coal mining and washing (5.0%), oil and gas (4.2%), chemical raw materials (7.8%), ferrous metal smelting (5.9%), non-ferrous metal smelting (6.7%), non-metallic mineral products (0.7%), electrical machinery (11.9%), electricity (2.3%) and agriculture (0.3%) saw increases in output; while textiles (-3.5%), communications (-2.6%), general manufacturing (- 1.2%) and the automotive industry (-1.0%) saw output fall.
- NZ: New Zealand's current account deficit widened to NZ$9.4 billion in the fourth quarter of 2022 from a gap of NZ$7.5 billion a year earlier, compared with analysts forecast for an opening of NZ$7.5 billion. The goods deficit widened to NZ$4.6 billion from NZ$2.8 billion a year earlier, while the services deficit narrowed to NZ$1.4 billion from NZ$2.1 billion. Meanwhile, the primary revenue shortfall rose to NZ$3.3 billion from NZ$2.6 billion, with secondary revenue recording a surplus of NZ$300 million, compared with a gap of NZ$80 million a year ago.
Today, investors should watch out for the following important data:
- AUD: MI Inflation Expectations, Employment Change, Unemployment Rate, and CB Leading Index m/m.
- CAD: BOC Gov Macklem Speaks.
- USD: Core PPI m/m, Philly Fed Manufacturing Index, Unemployment Claims, Building Permits, Housing Starts, Mortgage Delinquencies, Natural Gas Storage, and FOMC Member Cook Speaks.
- EUR: ECB Economic Bulletin, Italian Trade Balance, Spanish 10-y Bond Auction, and German Buba President Nagel Speaks.
- JPY: Core Machinery Orders m/m, and Trade Balance.
- GBP: MPC Member Pill Speaks.
KEY EQUITY & BOND MARKET DRIVERS:
Кey factors in the stock and bond market are currently:
- FR: The 10-year OAT yield plunged to 2.6% in March, the lowest level in more than a month, as a rout in European banks sparked a new flight to safety in government bonds. Credit Suisse's largest shareholder, the National Bank of Saudi Arabia, said it would not inject capital to help the Swiss lender rebound from "substantial weakness" after major bank failures in the United States, raising fears of a new crisis the sector. The development prompted money markets to ease bets on how much the ECB will raise interest rates in March, even as policymakers signaled a clear 50 basis point hike. On the fiscal front, the French Senate voted to raise the mandatory retirement age by two years to 64, defying strong opposition from trade unions.
- IT: Italy's 10-year bond yield fell to as low as 4.1% in mid-March, its lowest level in six weeks, tracking a global rally in government bonds as concerns about the health of Europe's financial sector reignited a rush for bond safety. The National Bank of Saudi Arabia, Credit Suisse's largest shareholder, said it would not inject any capital to help it address its "substantial weaknesses," fueling concerns about international financial instability following the collapse of a major U.S. bank. The development prompted investors to consider that the European Central Bank could hike interest rates tomorrow more slowly than the 50 basis points the central bank had previously signaled, further boosting demand for bonds. Nonetheless, the possibility of faster quantitative tightening limited the decline in yields. As a result, the spread between the closely watched Italian 10-year BTP and its German counterpart widened to a two-month high of 192 basis points.
- GE: German 10-year government bond yields fell below 2.2%, the lowest level since Feb. 2, as investors sought safety as they assessed the likely impact of the turmoil in European and U.S. banking systems on the outlook for monetary policy. The sharp drop in yields came after Credit Suisse's largest shareholder, the National Bank of Saudi Arabia, said it would no longer be able to provide any cash to support the struggling lender due to regulatory restrictions. Global markets were already hit by the failure of a Silicon Valley bank earlier this week, despite steps by U.S. authorities to boost confidence in the financial sector. On the policy front, the ECB is expected to raise rates by at least 25 basis points on Thursday, with a 50% chance of a half-point hike, while the U.S. Federal Reserve is likely to keep raising rates at a slower pace.
- JP: The yen strengthened to 132 yen against the dollar, its highest level in four weeks, after Credit Suisse's woes weighed on the global banking sector. Shares in Credit Suisse fell nearly 25% after its largest shareholder, the National Bank of Saudi Arabia, ruled out further liquidity injections. Earlier in the week, the bank identified "certain material deficiencies in our internal controls over financial reporting" in 2021 and 2022. On the domestic front, minutes from the Bank of Japan's January meeting showed that members reiterated the need to maintain an ultra-loose policy and said it would take time to achieve the 2% inflation target sustainably and stably. At its final policy meeting, the Bank of Japan kept its ultra-low interest rate policy unchanged this month before Governor Haruhiko Kuroda retired.
- UK: UK 10-year government bond yields fell to 3.3% as investors sought safety amid heightened concerns about the European and US banking systems. Saudi National Bank, Credit Suisse's biggest shareholder, said it had identified "material deficiencies" in its financial reporting for 2022 and 2021, a day after it ruled out sending the troubled bank to the troubled bank. The possibility of further capital injections by the bank. Potential spillover effects from the collapse of Silicon Valley Bank had already hit global markets earlier this week. Meanwhile, the chancellor's budget is in the spotlight, with Jeremy Hunt promising to halve inflation, reduce debt and boost economic growth. The chancellor said Britain would avoid recession in 2023, and inflation could fall to 2.9% by 2023. Hunt also said he expected Britain to meet the fiscal rules set by the government in November.
- US: Stock futures contracts tied to the blue-chip Dow Jones and S&P 500 fell nearly 2% on Wednesday, while futures contracts tied to the Nasdaq 100 fell 1.5% as worries about systemic risks in the banking sector again hit investors—preference for riskier assets. The shift in sentiment was triggered by a more than 25% plunge in Credit Suisse shares after its largest shareholder, the National Bank of Saudi Arabia, ruled out more aid, halting trading at several European banks. Meanwhile, Citizens Financial Group and Bank of America fell nearly 4% in premarket trading, dragging down shares of big banks, including Wells Fargo and Bank of America. On the economic front, the Labor Department's PPI report showed headline and core inflation slowed more than expected in February, opening the door to a possible pause in the Fed's tightening cycle.
- US: The yield on the U.S. 10-year Treasury note, seen as a proxy for global borrowing costs, fell to around 3.4%, near its highest level since September 2022, as investors piled in amid lingering can about the health of the global banking sector—safe-haven assets. Credit Suisse lost nearly a quarter of its value to a record low after its biggest shareholder, the National Bank of Saudi Arabia, ruled out more aid. Earlier this week, the collapse of Silicon Valley Bank and Signature Bank renewed investor concerns about the resilience of the global banking system. Meanwhile, the Labor Department's PPI report showed headline and core inflation slowed more than expected in February, opening the door to a possible pause in the Fed's tightening cycle.
LEADING MARKET SECTORS:
- Strong sectors: Utilities, Consumer Staples, Communication Services.
- Weak sectors: Energy, Financials, Materials, Industrials, Consumer Discretionary.
TOP CURRENCY & COMMODITIES MARKET DRIVERS:
Кey factors in the currency and commodities market are currently:
- GBP: Sterling fell back below $1.21 as investors sold riskier currencies amid ongoing concerns over Europe's banking system. Shares in Credit Suisse fell to record lows after the bank admitted it had identified "substantial weaknesses" in a report and its largest shareholder ruled out further liquidity injections. Elsewhere, investors digested UK Chancellor of the Exchequer Jeremy Hunt's budget. The chancellor pledged to halve inflation, reduce debt and boost economic growth, saying Britain would not enter a technical recession this year and that inflation could fall to 2.9% by the end of 2023. Hunt also said he expected Britain to meet the fiscal rules set by the government November.
- USD: The U.S. dollar index rose nearly 1 percent to 104.6 on Wednesday after Credit Suisse's woes revived concerns about the health of the global banking sector, heightening risk aversion and risk-off sentiment. Credit Suisse's largest shareholder, the Saudi National Bank, ruled out further liquidity injections, sending shares down nearly 25% and halting trading at several European banks. Investors are also reassessing the Federal Reserve's monetary policy outlook in light of recent turmoil in the U.S. banking sector and the latest U.S. inflation report. The euro (-1.5%), Swiss franc (-1%), and British pound (-0.6%) reported the most buying activity, while the yen strengthened.
- CNY: The offshore yuan fell to 6.9 per dollar, retreating from a one-month high, as mixed economic data from China pointed to an uneven economic recovery since the country ended its dynamic zeroing policy. According to official data, China's retail sales turned to growth in the first two months of 2023, but industrial production expanded less than expected, and the real estate sector remained weak. In addition, loose Chinese inflation data also boosted speculation that the People's Bank of China will maintain an accommodative stance. As a result, the central bank kept the one-year medium-term lending facility rate at 2.75% when it fixed rates in March. Meanwhile, investors continued to assess the Federal Reserve's monetary policy outlook in light of recent turmoil in the U.S. banking sector and the latest U.S. inflation report.
- JPY: The yen weakened to 135 yen against the dollar, off a one-month high, as minutes from the Bank of Japan's January meeting showed that members reiterated the need to maintain the ultra-loose policy and said it would take time to achieve 2% sustainably and stably stable manner inflation target. This month, the BOJ kept its ultra-low interest rate policy unchanged at the last meeting before Governor Haruhiko Kuroda retired. Japanese policymakers have also given no signal to the end of the central bank's yield curve control, underscoring their preference in recent speeches that at least until Kuroda's successor, Kazoo Ueda, takes over as central bank governor in April, postponing major policy changes. Meanwhile, investors continued to assess the Federal Reserve's monetary policy outlook in light of recent turmoil in the U.S. banking sector and the latest U.S. inflation report.
- SLV: Silver futures jumped to over $22.2 an ounce in mid-March, the highest in more than a month to follow the rally in other precious metals as concerns over the health of banks around the world pushed investors to flee to the safety of valuable assets. The Saudi National Bank ruled out further investments for Credit Suisse despite its warning of material weakness, amplifying concerns of instability in the European financial system after the closure of major US lenders and ahead of faster quantitative tightening by the ECB. The ongoing banking debacle has prompted money markets to consider an equal chance for the Fed to hike its fund's rate by a small 25bps rate hike and leave it unchanged at the next central bank meeting. Meanwhile, US producer prices slowed more than expected, fueling hopes that inflation in the US economy may ease.
- GLD: Gold climbed above $1,920 an ounce on Wednesday, the highest in six weeks, as investors flocked to safe-haven assets and shifted expectations on central bank interest rate plans amid the stress of the market. Fears of a broader financial crisis intensified after shares of Credit Suisse, a Swiss bank with large operations in the US and worldwide, plunged more than 20%. It comes after the collapse of Silicon Valley Bank and Signature Bank earlier in the week. The metal is up more than 3% this week, prompted by speculation that the Fed may suspend its tightening campaign to avoid further risks to the financial system. New data also showed that the annual inflation rate in the US slowed further to 6% in February, the lowest since September 2021, in line with expectations.
- GAS: US natural gas futures extended losses to about $2.5/MMBtu Wednesday as investors monitored forecasts for heating demand and balanced record LNG exports against rising gas production. The total amount of gas flowing to the seven largest U.S. LNG export facilities had increased so far to 11.1 billion cubic feet in March 2023 from 12.8 billion cubic feet in February, breaking a monthly record of 12.9 billion cubic feet achieved in March 2022 when the Freeport plant returned to service following the fire-related shutdown in June 2022. Meanwhile, average U.S. gas demand, including exports, is expected to rise to 120.4 bcf next week from 119.8 bcf this week, above forecasts from Refinitiv on Friday. On the other hand, average gas production in the lower 48 US states grew to 98.8 billion cubic feet this month, up from 98.2 billion cubic feet in the prior period.
CHART OF THE DAY:
The euro fell more than 1 percent to settle below $1.06 as shares in Credit Suisse hit a record low amid heightened concerns about Europe's banking system and the bank's largest shareholder ruled out further liquidity injections. Meanwhile, investors await the European Central Bank's policy statement due on Thursday, with policymakers forecasting a rate hike of at least 25 basis points, with a 50% chance of a larger half-basis-point hike. Still, the ECB is likely to take a more dovish stance given the ongoing risks to financial stability following the collapse of Silicon Valley banks. In the U.S., the Federal Reserve is seen as taking a more cautious approach, announcing a 25-basis point rate hike at its March meeting instead of the 50-basis point previously expected, as policymakers weigh risks to the U.S. financial system against stubborn high inflation.
Long-term Channels Trading Strategy: - EURUSD -; Chart with time-frame (D1; The primary Resistance is around ~ ( 1.101 ), and the primary Support is everywhere ~ ( 1.053 ). Therefore, the next most probable price movement is a (sideways) trend. *see details on the chart.
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