Bank sector woes continued last week increasing concerns about the stability of the US economy. Many investors now think the Fed may be forced to pause its current cycle of rate increases in response. We’ll find out on Wednesday.
Following the collapse of Silicon Valley Bank in the US, which prompted a sell-off in risk-assets, stocks rebounded after US CPI data on Tuesday showed the annual inflation Rate fell to 6% in February. This provided some relief although core inflation was reported higher than forecasted.
News came on Wednesday that Credit Suisse was also having problems and yesterday (Sunday) UBS was persuaded by regulators to buy its rival in an emergency deal with the hope that confidence could be restored. Today (Monday) markets are a bit calmer – equities are holding steady, the US 10-yr Treasury Yield is slightly higher and the Dollar down a little.
Looking ahead, the US Fed will announce its latest decision on interest rates on Wednesday and analysts are finding it difficult to judge if rates will be kept unchanged or lifted again by 0.25%, as previously expected. The central bank has to weigh concerns over the health of the global banking system with the task of keeping inflation under control.
The ECB prioritised the inflation battle last week when it announced a 0.5% hike, saying “inflation is projected to remain too high for too long”. Regarding recent volatility in banking stocks it added “the governing council is monitoring current market tensions closely and stands ready to respond as necessary to preserve price stability and financial stability in the euro area.”
In the UK Chancellor Jeremy Hunt announced his Spring Budget last week promising to halve inflation and grow the economy, read our full report here
Latest UK inflation data will be released on Wednesday. The Bank of England will be announcing its latest interest rate decision on Thursday.
UK Market Chart 17th March 2023
US Market Chart 17th March 2023
US Risk Barometer 17th March 2023
Europe Risk Barometer 17th March 2023
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