Traders’ Diary: Everything you need to get ready for the week ahead
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After the collapses of Silicon Valley Bank, Signature Bank and Silvergate in the last few weeks, it was Switzerland’s Credit Suisse (CS) that had investors worried last week.
Unease about CS’ mounting problems has come to a peak as the bank received a Swiss National Bank (SNB) backstop. The SNB approved a $54 billion lifeline to CS, but investors remained skittish about a potential collapse.
The crisis has spread to other banks, with San Francisco’s First Republic Bank – a wealth specialist that caters to super wealthy clients including Mark Zuckerberg – being rescued by the likes of JPMorgan Chase, Bank of America, Citigroup and Wells Fargo after they agreed to deposit US$30 billion at First Republic.
Treasury Secretary Janet Yellen meanwhile assured Congress that the US banking system was “sound”.
“I can reassure the members of the committee that our banking system is sound, and that Americans can feel confident that their deposits will be there when they need them,” she said.
Christian Baylis, investment manager at Blossom, said the impact of all this in Australia will be higher funding costs, and higher deposit rates to attract depositors.
“The most significant benefit will be for mortgage holders, as we expect this to take the wind out of the sails of the RBA,” said Bayliss.
The US headline CPI release showed that inflation rose 6% from a year ago, which was the smallest annual gain since September 2021.
“Inflation is cooling but disinflation trends are clearly not back,” said Oanda analyst, Edward Moya. “This inflation data still supports the case for another quarter-point rate hike by the Fed.”
Goldman Sachs, Barclays, Wells Fargo, and NatWest are all expecting the Fed to pause its rate hike on March 22, especially after the SVB debacle.
Jeffrey Schulze, investment strategist at ClearBridge Investments sees the Fed recalibrating its path, as well as a US recession in the horizon.
“We view a 25 basis point rate hike as the most likely outcome at the next FOMC meeting on March 22,” Schulze said.
“Given the fluidity of the situation, a pause is also possible with rate cuts and a 50 bps hike even more remote at this juncture.”
Australia’s unemployment rate fell to 3.5% in February (from 3.7% in January) after more than 64,000 Aussies found work.
It comes as the the RBA forecast the the rate to remain “around 3.5 per cent” until mid-this year.
While RBA governor Philip Lowe had previously stated that unemployment would need to reach 4.5% to tame inflation, recent economic data, followed by the banking crisis, has dramatically shifted sentiment.
“It also appears that inflation may no longer be the primary concern for the economy, at least in the short term,” said Dylan Zhang, ASX equities analyst at Stake.
“In the space of a week, the market consensus of a 50bps March rate hike in the US has been turned on its head, now being priced in between 0 and 25bps.
“The RBA will remain committed to cooling inflation, but the global issues we have seen this week mean concern is rapidly shifting to focus on the overall health of the economy, rather than inflation alone.”
The RBA will next meet to decide on interest rates on Aprl 4th.
All sources from Commsec and Investing.com
Speech from RBA Assistant Governor, Christopher Kent
ANZ and Roy Morgan weekly consumer confidence index
RBA Board March meeting minutes
NZ trade balance
NZ consumer sentiment
Detailed labour force
Finance and wealth of Australians
‘Flash’ purchasing manager surveys
The major event this week is the US FOMC meeting on Tuesday and Wednesday (US time). Given the recent spate of US regional bank failures, the Fed could pause its rate hike. CBA economists still however think that a 25bp rate hike is likely to bring down inflation.
China Loan prime rates
EU trade balance
US existing home sales
US Federal Reserve interest rate decision
EU current account
US New home sales
US Chicago Federal Reserve activity index
US Kansas City indexes
Bank of England interest rate decision
EU consumer confidence
US durable goods orders
US ‘Flash’ purchasing manager surveys
EU manufacturing and services PMI
According to the ASX, there will be no new company listings this week.