“After yesterday’s flight to safety amid Credit Suisse collapse fears, market sentiment improves this morning as concerns ease. Later today, the European Central Bank is set to disclose its policy decisions, while the US economic calendar will showcase February Housing Starts, Building Permits, and the Federal Reserve Bank of Philadelphia’s Manufacturing Survey for March.”
Main Headlines
The Federal Deposit Insurance Corp (FDIC) restored $40 billion to the US Treasury General Account this Tuesday, after initially withdrawing it on Friday to deal with the failure of Silicon Valley Bank. In response to the crisis, the Treasury, FDIC, and Federal Reserve announced deposit guarantees for both insured and uninsured deposits at the institution and New York’s Signature Bank to reinforce confidence in the banking system. The Federal Reserve also opened a new facility to provide emergency funds to the banks.
Amid an ongoing crisis, Credit Suisse has sought assistance from its central bank to alleviate concerns about its financial stability. In a recent statement, the bank revealed it would acquire up to 50 billion Swiss francs (£44 billion) from the Swiss National Bank, describing the move as a “resolute step” to fortify its liquidity. Yesterday, Credit Suisse faced turmoil in the banking sector as its shares plummeted by 30% at one point, following the largest shareholder’s decision not to increase their stake in the institution. CEO Ulrich Koerner emphasized that the bolstered liquidity would aid Credit Suisse’s fundamental operations and clientele.
Markets
European markets showed signs of recovery this morning, as regional investors welcomed the Swiss National Bank’s liquidity backstop for Credit Suisse. Credit Suisse shares rebounded, surging up to 30% in early trade before stabilizing at a 23% gain. The pan-European Stoxx 600 index rose by 0.5% in morning trading, with most sectors and major bourses opening positively. Bank stocks led the rally, initially increasing by 2.6% before settling at 1.7%, while financial services gained 1.8%. However, health care stocks moved into negative territory.
GBP
Sterling is stronger against the dollar and weaker against euro this morning. UK Chancellor Jeremy Hunt presented a budget statement yesterday, attempting to demonstrate the improving state of Britain’s economy. The budget included £20 billion ($24.1 billion) in spending for energy subsidies, childcare, and business investment incentives. However, it remains uncertain whether this will boost the Conservative Party’s prospects before the next election, as the opposition Labour Party continues to dominate opinion polls.
EUR
Euro is well bid against most major currencies overnight. Anticipation for a substantial European Central Bank (ECB) interest rate hike this week diminished yesterday, as the turmoil in Credit Suisse shares raised concerns about Europe’s banking sector. Money market pricing currently suggests a less than 20% probability of a 50 basis point rate hike at today’s scheduled ECB meeting, a stark contrast to the 90% chance projected earlier.
USD
The dollar is weaker than most major currencies in the early morning trade. According to Wall Street analysts, the swift collapse of SVB Financial Group may increase pressure on small and mid-sized US banks, potentially slowing the economy and raising the likelihood of a recession this year. J.P.Morgan suggests that regulatory scrutiny on smaller banks and deposit runs could limit loan growth, resulting in a GDP reduction of 0.5% to 1.0% over the next one to two years.
Ballinger & Co. Market Analysis– 16th March 2023
Today’s Market Rates
Today’s Interbank Rates at 11:10 am against GBP movement.
GBP>EUR – 1.1343
GBP>USD – 1.2039
EUR>USD – 1.0614
GBP>CAD – 1.6567
GBP>AUD – 1.8124
GBP>SEK – 12.727
GBP>AED – 4.4201
GBP>HKD – 9.4500
GBP>ZAR – 22.156
GBP>CHF – 1.1180
Today’s Highlights
· 8:00 a.m.: Norway Jan. GDP
· 9:00 a.m.: Spain 4Q Labor Costs
· 9:10 a.m.: Riksbank’s Floden speaks
· 10:00 a.m.: Italy Feb. CPI
· 12:00 p.m.: Ireland Feb. CPI
· 12:00 p.m.: UK OBR briefs on budget
· 1:00 p.m.: Ukraine Key Rate
· 2:00 p.m.: Poland Jan. Trade Balance
· 2:15 p.m.: ECB Rate Decision
· 2:45 p.m.: ECB’s Lagarde holds press conference
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