Here’s what you need to know in the financial markets on Friday, March 17th, as concerns over the banking sector continue to rise in the US and Europe, banks are turning to the security of Fed liquidity. China is easing its monetary policy to support post-COVID-19 recovery. Stocks are holding onto Thursday’s gains, but First Republic is again down in pre-market. The Michigan Consumer Sentiment Index completes a big week for economic data, and oil prices are struggling to make progress.
- Banks are running to the Fed for security in the financial markets.
As concerns about the banking sector continue to rise in the US and Europe, banks are rushing to the safety of the Fed’s liquidity. According to the central bank’s weekly balance sheet, $153 billion was lent through the discount window – more than at any time during the 2008 crisis – while the Fed’s new support facility, the Bank Term Funding Program (BTFP), lent an additional $12 billion. Analysts expect the BTFP to have a larger share of borrowing in the coming weeks due to more favorable conditions.
This news was a reality check for those who thought the coordinated action taken to support First Republic on Thursday would dispel ongoing concerns about the stability of mid-sized banks in the US. Shares of First Republic (FRC) fell 5.6% in pre-market trading, erasing much of Thursday’s rally, while shares of PacWest (PACW) fell 2.6%. Other mid-sized banks performed slightly better, while shares of 1st-tier banks such as JPMorgan (JPM) experienced a small decline.
- China is easing its monetary policy.
At a time when major Western central banks are still in tightening mode, the People’s Bank of China (PBoC) has lowered the required reserve ratio by 25 basis points for large banks, one of the key tools of its monetary policy. The ratio is now at its lowest level since 2007 at 7.6% by weight.
This move aims to help China achieve its growth target of 5% this year and support the “weak links” in the economy (though it did not specifically mention the real estate sector). It came after disappointing industrial production and trade data for the week.
Meanwhile, the Kremlin confirmed that President Xi Jinping will visit Moscow next week, shedding new light on China’s willingness to support Russia’s war in Ukraine, which has been a major factor in the weakening demand for Chinese factory goods in the West.
- Stocks set to open mixed.
The relief that came with the rescue of First Republic on Thursday is leaving doubts about whether the underlying problems in the banking sector over the past two weeks have really been resolved, causing US markets to open mixed. Sentiment towards First Republic may not have been supported by reports that bank executives were actively selling stock in the weeks before the acceleration of deposit outflows. While the Dow Jones fell 0.3%, the S&P 500 fell 0.1% and the Nasdaq 100 remained essentially flat. The major cash indices are all on track to end the week in the green.
Among the stocks of interest is FedEx (FDX), which showed an increase of over 11% pre-market after posting a strong earnings report and a big boost to its profit outlook for the year despite an expected slowdown in the logistics sector.
The week will conclude with the release of the Michigan Consumer Sentiment Index. Stronger-than-expected numbers from the housing and labor markets this week helped to offset the impact of weak retail sales and producer price data at the start of the week.
- Credit Suisse falls after merger proposal rejection.
Avrupa bankacılık sektörünün hasta adamı yataktan çıkmıyor. Bloomberg’in, Credit Suisse’in (CSGN), İsviçreli düzenleyicilerin çok daha büyük rakibi UBS’nin kendisini devralması önerisini reddettiğini bildirmesinin ardından banka hisseleri, Zürih’te %8,5’in üzerinde değer kaybetti. Haber bültenine göre UBS’in de anlaşmaya karşı olduğu bildirildi. İsviçre, bir önceki mali krizin ardından tüm büyük yargı bölgeleri arasında en sıkı sermaye ve likidite gerekliliklerini uygulayarak bir finans merkezi olarak itibarını zedeleyen krize bir çözüm bulma baskısı altında. UBS ile birleşme, bu iki bankanın birleşmesinin İsviçre bankacılık sektöründe kabul edilemez yoğunlaşma riskleri yaratacağı yönündeki uzun süredir savunulan bir ilkeyi ihlal edecek. Bu arada UBS (UBS) hisseleri de haberlerden zarar gördü ve New York’ta piyasa öncesi dönemde %3’ün üzerinde düşüş gösterdi.
- Oil is struggling with economic fears.
After a week in which concerns about financial stability have forced market participants to adopt a more cautious view of potential demand growth this year, crude oil prices struggled to make headway, despite official agency forecasts that predate the recent banking turmoil.
WTI futures traded up 0.8% at $68.92 while Brent found buyers, up 0.6% at $75.11. Attention could be more focused than usual on the Baker Hughes rig count, after the U.S. government forecast that shale oil production will peak in the spring. Meanwhile, last week’s CFTC positioning data is likely to reflect a liquidation of speculative long positions.