March 17, 2023

“Yesterday, the ECB pressed on with their promised 50 basis point interest rate hike, despite growing fears of further defaults in the banking sector. This followed the SNB stepping in to support Credit Suisse with 50bn CHF and a 30bn USD bailout for First Republic Bank by a collection of larger US banks.”

Tim Hallinan – Trading Director

Main Headlines

Treasury Secretary Janet Yellen testified to a Senate committee that the US banking system is stable and defended the Biden administration’s actions to rescue depositors of Silicon Valley Bank and Signature Bank and prevent financial contagion. During the hearing, Yellen faced tough questions from lawmakers about the regulators’ aggressive intervention and the creation of a Federal Reserve facility to provide liquidity to other banks.

UK Chancellor Jeremy Hunt has abandoned plans to make sovereign wealth funds (SWFs) pay corporation tax on property and commercial enterprises due to concerns from cabinet members that the move would negatively impact inward investment and growth. Kemi Badenoch, the Business and Trade Secretary, led the push to drop the proposals, arguing that SWFs, which include some of the world’s largest investors, could pull out of UK projects.

GBP

Sterling is stronger against the dollar and weaker against euro this morning. Vanguard, the asset management giant that primarily sells passive funds, reported that approximately 40% of new clients on its UK direct-to-consumer platform in 2022 were under the age of 30. While the platform drew new clients across all age groups, it resonated particularly well with younger investors. In other news, a pay agreement was reached between health unions and the government, ending a wave of strikes by NHS workers in England.

EUR

Euro is well bid against most major currencies this morning. French ECB policymaker Francois Villeroy de Galhau stated that the European Central Bank’s decision to raise interest rates by half a point on Thursday reflects the central bank’s priority of fighting inflation and signals strong confidence in the stability of European banks. Deutsche Bank paid CEO Christian Sewing 8.9 million euros in 2022, up slightly from the previous year, in recognition of his third consecutive year of profit and meeting key restructuring milestones.

USD

The dollar is weaker than most major currencies in the early morning trade. Top Republicans are calling on the White House to tighten restrictions on nuclear cooperation between Russia and China, citing reports that Moscow’s state-owned nuclear energy company is supplying highly enriched uranium to Beijing. The chair of a US Senate panel overseeing aviation issues has called for more air traffic controllers to address rising passenger demand, amidst ongoing investigations into recent runway incidents.

Markets

US equity-index futures were steady on Friday and Treasuries gained, capping a tumultuous week for global markets amid lingering concern that the financial turmoil which has roiled bonds and stocks is not over. Contracts on the S&P 500 edged higher after the index rallied 1.8% yesterday as larger banks threw a lifeline to First Republic Bank, the latest US lender to signal stress. Futures on the Nasdaq 100 were flat as the rates-sensitive gauge heads for its best week since November amid expectations the Federal Reserve will temper its tightening path.

Main Economic Data/Central Banks/Government (All Times CET)

9:00 a.m.: Slovakia Feb. CPI
10:30 a.m.: BOE Releases Ipsos Inflation Attitudes Survey
11:00 a.m.: Euro-area Feb. CPI
11:30 a.m.: Russia Central Bank Rate Decision
12:00 p.m.: OECD Publishes Interim Economic Outlook
2:15 p.m.: US Feb. Industrial Production

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