Marketmind-Deep breaths as banks calm, but only a bit
Send a link to a friend
[March 15, 2023] A
look at the day ahead in U.S. and global markets from Mike Dolan
Hyperventilating world markets have finally caught their breath as the
U.S. bank shock of the past week appeared to calm somewhat and gyrating
interest rates found a level.
But volatility is likely to persistMOVE> - not least in pre-meeting
blackout periods for major central banks - as easing financial system
tensions merely re-introduce rate hike risks that sticky US inflation
readings seem to warrant.
And with longer-running global banking sagas exposed by the events of
the past week, nerves were jangled again on Wednesday as Credit Suisse
shares dropped by as much as 10.5% to a new record low, as its largest
investor said it couldn't give the Swiss bank more financial assistance.
After bank stocks rebounded somewhat on Tuesday, despite Moody's
downgrading the credit outlook for the entire U.S. banking system,
attention turned to tighter regulation and workouts for the worst
affected firms.
The Federal Reserve is considering tougher rules and oversight for
midsize banks similar in size to Silicon Valley Bank, which collapsed
suddenly last week. Strengthened rules on banks in the $100 billion to
$250 billion range could ape those for larger more systemic banks and
involve stringent capital and liquidity requirements or beefed up annual
"stress tests".
![](http://archives.lincolndailynews.com/2023/Mar/15/images/ads/current/LPL_small%201.gif)
Even though reports abounded of depositor flight from the smaller weaker
banks to the larger financial firms, stock prices in the sector at large
caught a breath.
That continued in Asia on Wednesday, although Europe's bank stocks and
wider bourses stayed in the red and U.S. futures were a touch lower. The
VIX equity volatility gauge hugged Tuesday's close at 23.
Apart from fresh Credit Suisse angst, another reason for the persistent
trepidation in Europe was signals from central bank sources that the
European Central Bank would push ahead with a hefty half-point interest
rate rise at its policymaking meeting on Thursday.
If the ECB stays the course and the Fed follows suit next week, anxiety
about further banking ructions may return - or at least see further wild
volatility in rates markets that could end up having similar effects.
U.S. Treasury market volatility is already at its highest since the
aftermath of the last big banking crash in 2009, with the biggest drop
since 1987 in 2-year Treasury yields on Monday followed by the biggest
one-day jump in 14 years on Tuesday.
![](http://archives.lincolndailynews.com/2023/Mar/15/images/ads/current/ldn_sda_KAREN_012823.png)
[to top of second column] |
![](../images/031523PIX/busine64.jpg)
A specialist trader works inside a post
on the floor of the New York Stock Exchange (NYSE) in New York City,
U.S., March 14, 2023. REUTERS/Brendan McDermid
![](http://archives.lincolndailynews.com/2023/Mar/15/images/ads/current/heartland_lda_020123.png)
On Wednesday, 2-year yields settled about 4.3% - still 80 basis
points lower than they were a week ago, but up half a point from
Tuesday's trough. Futures markets now see an 80% chance of a
quarter-point Fed hike next week to a 4.75-5.0% range, with a
'terminal rate' at 5% in May.
The dollar was slightly higher as rates recalibrated.
Chinese industrial and retail updates for February showed the
post-COVID lockdown recovery underway but at an underwhelming pace.
Sterling was steady at investors awaited the Spring UK budget, with
bumper tax receipts allowing finance minister Jeremy Hunt to offer
some relief to pensions and childcare while extending critical
energy price supports.
With widespread trepidation about the impact of the SVB collapse on
the U.S. tech sector at large, Facebook-parent Meta said on Tuesday
it would cut 10,000 jobs this year, making it the first Big Tech
company to announce a second round of mass layoffs as the industry
braces for a deep economic downturn.
Apple supplier Foxconn said on Wednesday it expected smart consumer
electronics demand would decline slightly this year, as it reported
a 10% fall in fourth-quarter net profit from a year earlier.
In more upbeat tech news, startup OpenAI said it is beginning to
release a powerful artificial intelligence model known as GPT-4,
with image as well as text prompts in searches.
![](http://archives.lincolndailynews.com/2023/Mar/15/images/ads/current/merealty_sda_BASKETBALL_2022.png)
Key developments that may provide direction to U.S. markets later on
Wednesday:
* US Feb retail sales and producer prices, US March NAHB housing
market index, Empire State manufacturing survey, Jan business
inventories.
* UK government's Spring budget
* US corp earnings: Adobe
(By Mike Dolan, editing by Elaine Hardcastle; mike.dolan@thomsonreuters.com.
Twitter: @reutersMikeD)
[© 2023 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content. |