- Jo Earlam
- March 13, 2023
- 5:18 am
- 10 min read
The Silicon Valley Bank collapse raises questions over the banking sector and venture capital environment!
Indices
Futures
Forex
– Last week Stock markets ended their worst week so far this year with nearly a full week of declines. For the week, the Dow Jones Industrial Average fell 4.4% whilst the S&P500 slipped 4.4% and is currently trading at 3,861.59 (down another 1.45%).
– Federal Regulators closed tech-focused lender Silicon Valley Bank, marking the largest U.S. bank failure since the 2008 financial crash. Bank stocks have been hit hard and there are concerns about this sector moving forward.
– The collapse somewhat overshadowed positive macroeconomic data. The Non Farm payroll released on Friday showed 311,000 jobs were added in February compared to the 205k that was expected. The report also highlighted easing employee wages which suggests inflation might be easing.
– In the Eurozone, the European Central bank (ECB) is set to deliver another large interest rate hike on Thursday. The ECB remains committed to combat inflation which has proven to be extremely persistent. Eurozone Inflationary data in February is expected to be 8.5% (chart below), 5.6% if you exclude food and energy.
– The German 10-year bond yield is currently trading at 2.1% but is expected to peak closer to 3% during the first half of the year.
– European Union is relaxing rules on government tax breaks and other benefits for clean-tech companies. This is to compete with the U.S. clean tax breaks. The EU’s green programs is expected to add up to $1 trillion in spending this decade, according to projections from researchers at Bloomberg.
– The Chinese re-opening narrative appears to have ran out of steam as U.S – China tensions rise. Premier Li Qiang finally admits that the 5% growth target will be hard to reach as Xi Jin Ping says he will “build the military into a great wall of steel that effectively safeguards national sovereignty, security and our development interests”.
– Japanese stocks tumbled last Friday after the Bank of Japan (BOJ) held its interest rates at -0.1% which was inline with expectations. The Nikkei225 and Topix fell 1.76% and 1.91% respectively with the US Non-Farm Payrolls sending the stocks lower.
– April Gold futures (GCJ’23) had another very volatile week last week closing at 1,867.2 (Chart Below). The market traded in a wide range of 61pts up 3.39% and has rallied a further 2.48% so far today!
Conclusion
There is a heightened risk of further U.S. trouble as the banking sector comes under immense pressure. Key indicators also reinforce this viewpoint despite some positive job data. Equity markets come under pressure with some big corporate earning reports due to be released. Looking ahead we have the updates on the Empire Manufacturing Survey and latest retail sales, both of which are expected to show an economic slowdown. The reports should make it clear if the Federal Reserve will look to raise benchmark by 25 bps or 50bp at the FOMC meeting.
Written by:
Jo Earlam
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