Skip to main content

Tremors in the stock market.

 

SVB logo
The fail­ure of Sil­icon Val­ley Bank tore into global mar­kets yes­ter­day, with investors rip­ping up their fore­casts for fur­ther interest rate rises and dump­ing bank stocks around the world. Gov­ern­ment bond prices soared as fund man­agers bet that the US Fed­eral Reserve would leave rates unchanged to steady the fin­an­cial sys­tem. As recently as last week, mar­kets were braced for another half-per­cent­age point rise at this month’s mon­et­ary policy meet­ing. The two-year Treas­ury yield, which moves inversely to prices, had been on course for its biggest one-day fall since 1987 after slip­ping below 4 per cent.

US pres­id­ent Joe Biden sought to reas­sure Amer­ic­ans that their money was safe, vow­ing to do «whatever is needed» to pro­tect their depos­its. Investors were divided on what fur­ther action may be needed to shore up con­fid­ence in other US banks regarded as vul­ner­able to higher interest rates and flighty depos­its. Hedge fund man­ager Bill Ack­man called for the gov­ern­ment to «expli­citly guar­an­tee all depos­its now. Hours mat­ter.» But his coun­ter­part Ken Griffin, founder of Cit­adel, told the Fin­an­cial Times that the Biden admin­is­tra­tion’s move to back­stop all depos­its at SVB had been wrong-headed.

As fear spread, shares in First Repub­lic, another Cali­for­nia-based lender, dropped 77 per cent. The KBW banks index, which includes lar­ger lenders, fell 11 per cent. Con­ta­gion spread to Europe, where the Stoxx banks index fell a fur­ther 6.5 per cent. The fail­ure of SVB and clos­ure of Sig­na­ture Bank come just months after a short­lived crisis in UK gov­ern­ment bonds, under­lin­ing the risks bur­ied in the fin­an­cial sys­tem as cent­ral banks rap­idly lift bor­row­ing costs.

Investors and ana­lysts said poli­cy­makers would need to tread care­fully as they sought to lower infla­tion. Gold­man Sachs said that it no longer expec­ted any rate increase at the Fed’s meet­ing this month «in light of recent stress in the bank­ing sys­tem».
Labels:

Comments

  1. Melody14 March 2023 at 10:15

    In a way I understand these reactions. But in another way, why are we always reacting like this? Ok, a big bank is offline now, maybe for good. But why do all the other banks have to suffer even if there's no actual reason for it?

    ReplyDelete
    Replies
    1. John14 March 2023 at 11:07

      Even seasoned investors react this way when something (apparently) this big happens. It's how the market will always react. It's a time of uncertainty and a good time to make money. Just try to take advantage of it and don't go to the fear side.

      Delete
  2. Nigel14 March 2023 at 12:58

    First Republic is a good investment right now seeing as their stock is down 77%. It carries a certain level of risk but what doesn't? If you want to make money this is one of the moments to invest.

    ReplyDelete

Post a Comment

Cloud Bookkeeping

US FED rate rise.

  The US Federal Reserve officials have indicated that they plan to resume increasing interest rates to control inflation in the world's biggest economy. During the June meeting, the Federal Open Market Committee reached a consensus to keep interest rates stable for the time being to evaluate whether further tightening of policy would be necessary. However, the majority of the committee anticipates that additional rate increases will be required in the future. The minutes of the meeting have recently been made public. According to the minutes, most participants believed maintaining the federal funds rate at 5 to 5.25 per cent was appropriate or acceptable, despite some individuals wanting to raise the acceleration due to slow progress in cooling inflation. Although Fed forecasts predicted a mild recession starting later in the year, policymakers faced challenges in interpreting data that showed a tight job market and only slight improvements in inflation. Additionally, officials gr...
Post a Comment
Read more

EU business slide.

  S&P Global’s flash eurozone composite purchasing managers’ index, a key gauge of business conditions for the manufacturing and services sector, fell 1 point to 47.1, figures showed yesterday. That is its lowest level since November 2020 and the fourth consecutive month below the crucial 50 mark separating growth from contraction. One of the few bright spots in the survey was that companies in all sectors reported a slight easing of cost pressures, price growth and supply chain constraints. However, prices charged for goods and services still rose at the sixth fastest rate since such data started in 2002. Jobs growth increased marginally from October but remained low compared with the past 18 months. Following a few months of falling price pressure in manufacturing and services, the October print shows an overall stabilisation said Jens Eisenschmidt, chief European economist at Morgan Stanley. However, German businesses, at the hub of Europe’s energy crisis, reported that manu...
1 comment
Read more

Tariffs on UK electric cars.

  The European Commission has confirmed that it will continue with its plan to impose tariffs on electric cars exported between the UK and EU starting next year. This is due to the "rules of origin" requirement that mandates EVs traded across the English Channel to have 60% of their battery and 45% of their parts sourced from the EU or UK or face a 10% tariff. A senior Commission official, Richard Szostak, recently informed parliamentarians from the UK and EU that the bloc's battery investment has significantly declined, making the tariffs necessary to encourage domestic production. In 2022, the EU's share of global investment in battery production shrank from 41% to only 2% after the US offered substantial subsidies through its Inflation Reduction Act. Starting in 2024, car manufacturers in the UK will need to have 22% of their sales come from zero-emission vehicles, which means they may need to import EVs from the continent to meet this requirement. If EU carmakers ...
Post a Comment
Read more