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.

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