1 year ago
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Introduction: Markets to rally despite financial stability fears
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Risks to financial stability have increased, with the uncertainties in the world economy remained “exceptionally high”, the head of the International Monetary Fund has warned.
Speaking at a conference in Beijing last weekend, Kristalina Georgieva urged vigilance following the recent banking sector turmoil in advanced economies.
Georgieva cited the events in the banking sector, telling the annual China Development Forum that:
“At a time of higher debt levels, the rapid transition from a prolonged period of low interest rates to much higher rates – necessary to fight inflation – inevitably generates stresses and vulnerabilities, as evidenced by recent developments in the banking sector in some advanced economies.
Her comments came after several volatile weeks in the financial sector, which saw the failure of Silicon Valley Bank and the rescue of Credit Suisse by UBS.
Georgieva noted that policymakers have acting decisively, adding:
“These actions have eased market stresses to some extent but uncertainty is high and that underscores the need for vigilance.”
Banking sector jitters spread to Deutsche Bank last week, when shares in the German bank slipped and the cost of insuring its debt rose.
But, the selloff seemed to be triggered by a lack of confidence, rather than a specific problem at Deutsche.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says:
Despite the bank stress on both sides of the Atlantic, both, the Federal Reserve (Fed), the European Central Bank (ECB), the Bank of England (BoE) and the Swiss National Bank (SNB) haven’t refrained from hiking the interest rates over the past two weeks, weighing – not necessarily on the health of the banks’ balance sheets, but on worries regarding the health of the banks’ balance sheets.
Today, it appears that the banking crisis is more of a confidence crisis than a fact-based panic – as it was the case in 2007 when banks really had a bunch of toxic assets in their balance sheets.
But confidence is the bread and butter of the banking sector. And watching the 166-year-old Credit Suisse go under did no good to anyone last Monday.
But the markets do look calmer this morning, with the main European indices being called up almost 1% in pre-market trading.
The agenda
9am BST: Ifo index of Germany’s business climate for March
1aam BST: CBI distributive trades survey of UK retail for March
3.30pm BST: The Dallas Fed manufacturing index for March
6pm BST: Bank of England governor Andrew Bailey speaks at the LSE
Key events
Saudi National Bank chair resigns after Credit Suisse comments
Newsflash: the chair of Saudi National Bank has resigned, just days after helping to spark a slump in the Swiss lender’s shares.
Ammar Al Khudairy, the chairman of Credit Suisse’s largest shareholder, is stepping down “for personal reasons”, SNB said this morning.
He will be replaced by chief executive officer Saeed Mohammed Al Ghamdi
Al Khudairy hit the headlines this month, when he revealed that SNB, which owns a near-10% share of Credit Suisse, would not increase its stake.
Those comments appeared to send the Swiss bank’s shares tumbling, leading to its forced merger by UBS a few days later.
Saudi National Bank confirmed to CNBC last week that it had been hit with a loss of around 80% on its investment in Credit Suisse.
Deutsche Bank is expect to recover some of Friday’s losses today.
Deutsche Bank’s shares are up 4.2% in pre-market trading, after ending last week sharply lower.
Seems oddly calm this morning, but looking back it does seem like last week's panic over Deutsche Bank was a bit overdone...
— Chris Beauchamp (@ChrisB_IG) March 27, 2023Analysts did struggle to explain last Friday’s selloff, with Citigroup suggesting it may be down to an “irrational market.”
Introduction: Markets to rally despite financial stability fears
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Risks to financial stability have increased, with the uncertainties in the world economy remained “exceptionally high”, the head of the International Monetary Fund has warned.
Speaking at a conference in Beijing last weekend, Kristalina Georgieva urged vigilance following the recent banking sector turmoil in advanced economies.
Georgieva cited the events in the banking sector, telling the annual China Development Forum that:
“At a time of higher debt levels, the rapid transition from a prolonged period of low interest rates to much higher rates – necessary to fight inflation – inevitably generates stresses and vulnerabilities, as evidenced by recent developments in the banking sector in some advanced economies.
Her comments came after several volatile weeks in the financial sector, which saw the failure of Silicon Valley Bank and the rescue of Credit Suisse by UBS.
Georgieva noted that policymakers have acting decisively, adding:
“These actions have eased market stresses to some extent but uncertainty is high and that underscores the need for vigilance.”
Banking sector jitters spread to Deutsche Bank last week, when shares in the German bank slipped and the cost of insuring its debt rose.
But, the selloff seemed to be triggered by a lack of confidence, rather than a specific problem at Deutsche.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says:
Despite the bank stress on both sides of the Atlantic, both, the Federal Reserve (Fed), the European Central Bank (ECB), the Bank of England (BoE) and the Swiss National Bank (SNB) haven’t refrained from hiking the interest rates over the past two weeks, weighing – not necessarily on the health of the banks’ balance sheets, but on worries regarding the health of the banks’ balance sheets.
Today, it appears that the banking crisis is more of a confidence crisis than a fact-based panic – as it was the case in 2007 when banks really had a bunch of toxic assets in their balance sheets.
But confidence is the bread and butter of the banking sector. And watching the 166-year-old Credit Suisse go under did no good to anyone last Monday.
But the markets do look calmer this morning, with the main European indices being called up almost 1% in pre-market trading.
The agenda
9am BST: Ifo index of Germany’s business climate for March
1aam BST: CBI distributive trades survey of UK retail for March
3.30pm BST: The Dallas Fed manufacturing index for March
6pm BST: Bank of England governor Andrew Bailey speaks at the LSE
English (US)