Closing an Anxious Week With Risk Assets Looking Increasingly Bearish

Risk assets tumbled lower this week, as bank problems escalate, although there was a slight improvement toward the end of the week

Skerdian Meta•Sunday, March 19, 2023•2 min read

Yesterday there was a sense of calm in European trading with slight gains observed in equities and bond yields, but the gains quickly dissipated as nerves regarding the global banking situation resurfaced. While Wall Street and the FED may have helped induce some calm regarding First Republic Bank, it remains to be seen whether this will be enough to end the away in the upcoming trading session.

Bond yields started falling again and equities were being pushed lower as mixed sentiment continued to play out. In the forex market, the USD was slightly weaker but the early losses were pared somewhat, with EUR/USD up to around 1.0670 before dropping back to 1.0630. The final reading for the February CPI inflation was released yesterday, and the headline CPI was revised a tick lower.

Latest Data Released by Eurostat – 17 March 2023

February final CPI YoY +8.5% vs +8.5% prelim
Prelim February CPI YoY was +8.6%
Core CPI +5.6% vs +5.6% prelim
Prior core CPI was +5.3%

This just reaffirms that euro area headline annual inflation eased slightly in February but core inflation continues to pus higher and that will remain a problem for the ECB in the months ahead. This would be bullish for the Euro, but right now markets are focused on the banking crisis.

The SVB Financial also filed for Chapter 11 bankruptcy yesterday, believing it has $2.2 billion in liquidity. It appears that there is a strategic alternatives process currently underway for SVB Capital and SVB Securities operations, and there is significant interest in this process. The funding debt for these operations is approximately $3.3 billion in total, and there is also $3.7 billion in outstanding preferred equity.

I can certainly assist you with that. Morgan Stanley has revised its forecast for the European Central Bank’s terminal rate to 3.75%, which is lower than its previous forecast of 4%. However, this forecast is still higher than the 3.50% terminal rate forecasted by both Goldman Sachs and HSBC earlier today.

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.