Equities managed to finish generally higher for the week although it was a volatile period with more banking trauma and investors weighing central banks’ response and inflation concerns.
Over the weekend a US regional bank, First Citizens, agreed to purchase Silicon Valley Bank assets worth $72 billion easing concerns over the global financial system. Stocks are higher today (Monday) as is the yield on the 10yr US Treasury Note and UK Gilt.
The US Federal Reserve announced another hike in interest rates last week, this time at 0.25%. The central bank prioritised the fight against inflation which remains high, rather than a pause to further assess the damage in the banking sector. Chair Powell acknowledged the tensions in the sector and admitted that a pause had been considered but said it was “too soon to tell how monetary policy should respond“. When questioned about a pivot he responded that the members “don’t see rate cuts this year, they just don’t“. Whether markets are convinced about that remains to be seen.
In Europe, ECB President Christine Lagarde, attempted to calm nerves saying the EU banking sector was resilient and that the central bank had the tools to increase liquidity if needed.
In the UK, inflation rose unexpectedly to 10.4% in February (9.9% forecasted) and on Thursday the Bank of England raised rates for the eleventh consecutive time by a widely anticipated 0.25%, to 4.25%.
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