Until a week ago, everything was looking quite bright, as the economic data was showing improvement in the global economy, inflation was slowing and the FED was not picking up the pace of rate hikes again, which was keeping risk sentiment positive and stock markets bullish. A week after, the situation has turned upside-down and risk sentiment is deteriorating.

Today the market started the day slow with 2-year US bond and German bond yields rising, but the focus shifted to central banks as the SVB fallout receded. However, Credit Suisse’s troubles caused credit swaps to blow up, with markets pricing in a serious risk of default by the Swiss bank. This led to a plunge in bond yields and banking stocks, with Credit Suisse itself down over 20%.

US futures and European indices also experienced heavy losses. In the FX market, the dollar and yen strengthened, while the euro and franc tumbled due to idiosyncratic risks affecting the currencies. The EUR/USD fell 1.7% below 1.0520, while USD/CHF moved up to a high of 0.9260 before settling around 0.9215, up 0.8%. USD/JPY climbed up to hit 135.00 before falling to 132.20s.