Good morning
Global equities had another rough day on Friday as concerns over the banking crisis continued and futures prices this morning suggest further downside for equities today. The news that UBS has stepped in to buy Credit Suisse has done little to really help markets, no great surprise given the fact UBS have paid just $3.15billion against a valuation last year of some $570bn shows the damage done to CS in recent months but also the potential scale of toxic assets held by the beleaguered firm. Have UBS snapped up a bargain or a poisoned chalice? At that price I’d think it’ll be OK although with UBS shares over 10% lower this morning, I’m not sure everyone agrees.
The Fed, along with five other major central banks have also announced action to help ensure appropriate liquidity is US dollar swaps, showing really their concern at the current state of the financial markets. In fact although this action should help sentiment, there is now a question of whether they know something that we don’t, such as more bad news to upset the markets.
This concern did not stop ECB raising rates 50bps last week but expectations for the Fed on Wednesday have dropped from 50bps rise just a couple of weeks ago to a smaller rise of 25bps, although no change, perhaps even a cut, is not ruled out. BoE are expected to raise rates 25bps to 4.25% on Thursday. Plenty of volatility ahead.
GBP seems to be coming out ahead of other majors, with GBPUSD trading at 1.2210 as I type, EURUSD at 1.0660 which puts GBPEUR 1.1450. GBP certainly seems to have put last years turmoil behind it and for the time being at least looks pretty healthy. Gold has traded above $2000 for the first time since almost a year, while Bitcoin has also enjoyed this bout of USD weakness, trading up to $28,500, actually something of a long-term pivot area. I’m never going to try to forecast Bitcoin, as many of you know I think its real value should be minimal, but further gains look quite likely, something ironic that there is talk of Bitcoin as a safe haven doing the rounds.
Meanwhile credit agencies are downgrading banks, Moodys and S&P have lowered First Republic Bank rating, ‘locking the barn door after the horse has bolted’ springs to mind.
Putin made a surprise visit to Mariupol over the weekend where he could see first-hand the devastation inflicted on the Ukrainian city. Putin will meet China’s Xi today in Moscow with Ukraine no doubt high on the agenda, Russia may well be looking for China to provide armaments, but bear in mind China will do nothing unless it is in its own interests. Whether Xi is on a peace-finding mission or a show of support for his ‘ally’ remains to be seen, but as you know his idea of peace in Ukraine would likely involve Ukraine giving up vast parts of the country to Russia. That’s not going to work.
Congratulations for Ireland for winning the Six Nations, and the grand slam along with it. England looked like they may make a game of it until Englands Steward was handed a red card for a collision that looked nasty but was debatable as to whether it was dangerous play given he did seem to be pulling away. Looked like a harsh decision to many and one that really put Englands chances of a surprise victory well out of reach.
Not much in the way of data today, looking forward to hearing from Lagarde later, but let’s face it, the main event this week should be Wednesdays FOMC rate announcement, although even this is overshadowed in part by the ongoing banking crisis.
- 14.00/16.00 ECBs Lagarde speaks
- 20.00 NZ Westpac consumer surbey
- 21.45 NZ trade balance
- 00.30 RBA minutes