March 27, 2023

“This week, Eurozone HICP inflation for March is expected to show a significant drop-in headline rate, while the core rate is expected to rise. The Fed’s favoured inflation data, core-PCE inflation, is predicted to remain unchanged in February. Investor focus will also be on the banking sector due to the current delicate market sentiment.”

Tim Hallinan – Trading Director

Main Headlines

First Citizens BancShares Inc has announced that it will acquire the loans and deposits of Silicon Valley Bank, which was taken over by the Federal Deposit Insurance Corporation earlier this month. As part of the deal, the FDIC will receive equity appreciation rights in First Citizens BancShares stock, potentially worth up to $500 million. The transaction was designed to maintain the financial stability of First Citizens, which will take on SVB’s assets worth $110 billion, deposits worth $56 billion, and loans worth $72 billion.

A report by the National Audit Office has revealed that delaying the construction of the UK’s High Speed 2 rail line will result in additional costs for the project. The report also recommended reassessing plans for London Euston station. The decision to postpone the Birmingham to Crewe leg of the line and the final stretch into Euston was made earlier this month in response to rising inflation and years of delays and cost overruns.

GBP

Sterling is well bid against most major currencies this morning. British Prime Minister Rishi Sunak plans to crack down on antisocial behaviour by focusing on policing in several areas of England and Wales to win over voters ahead of next year’s election. Meanwhile, the UK’s antitrust regulator is investigating whether Électricité de France SA’s acquisition of General Electric Co.’s nuclear steam power business could raise competition concerns. Scotland’s new leader will be announced later today, tasked with unifying a divided country and reviving an independence movement.

EUR

Euro is stronger against the dollar and weaker against sterling this morning. A major strike in Germany has begun, impacting mass transport and airports. The country’s largest economy is struggling with soaring inflation. A referendum in Berlin aimed at making the city carbon neutral by 2030 failed to pass on Sunday. One of Europe’s leading ammunition manufacturers is facing obstacles to the expansion of its largest factory due to a new data center for TikTok that is using up all the spare electricity in the area.

USD

The dollar is weaker than most major currencies in the early morning trade. The banking industry’s recent turmoil heightens the risk of a US recession, says Minneapolis Fed’s Neel Kashkari. He stopped short of predicting a recession but admitted it could bring the economy closer to one. Investors have been pouring cash into US money market funds over the past two weeks, with Goldman Sachs, JPMorgan Chase, and Fidelity among the biggest beneficiaries. The collapse of two regional US banks and the Credit Suisse rescue deal have led to concerns about the safety of bank deposits, resulting in more than $286 billion flowing into money market funds in March.

Markets

Early gains for US equity futures evaporated as markets remained on edge, with investors weighing the risk of recession and its impact on interest rates while keeping an eye on the troubled banking sector. Contracts on the S&P 500 were little changed while those on the Nasdaq 100 slipped. The Treasury 10-year yield was little changed after rising about four basis points earlier, and the more rate-sensitive two-year rate held near a six-month low. A gauge of dollar strength was steady.

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

8:00 a.m.: Sweden Feb. Trade Balance
9:00 a.m.: Turkey March Capacity Utilization
10:00 a.m.: Germany March IFO Survey
10:00 a.m.: Euro-area Feb. M3 Money Supply
10:30 a.m.: ECB’s Nagel speaks
3:40 p.m.: ECB’s Elderson speaks
4:00 p.m.: ECB’s Centeno speaks
5:00 p.m.: ECB’s Schnabel speaks
7:00 p.m.: BOE’s Bailey speaks

Corporate Events

Earnings include Carnival, BioNTech

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