Good morning. Happy Friday.
The Asian/Pacific markets leaned to the downside. Indonesia and the Philippines did well; Hong Kong, South Korea, India and Malaysia were weak. Europe, Africa and the Middle East are currently down big. THe UK, Denmark, Poland, France, Germany, Greece, South Africa, Finland, Switzerland, Norway, Hungary, Spain, the Netherlands, Italy, Portugal, Austria, Sweden and the Czech Republic are down 1-4%. Futures in the States point towards a moderate gap down open for the cash market.
————— Masterclass Overview –>> here —————
The dollar is up. Oil and copper are down. Gold and silver are up. Bonds are up.
Stories/News from Seeking Alpha…
TikTok goes the clock
The U.S. government’s moves against TikTok – the runaway-success short-form video social app owned by China’s ByteDance (BDNCE) – have entered a new phase after a House hearing about the app’s dangers on Thursday. The panel, which put TikTok CEO Shou Zi Chew in the hot seat, described the gathering as a “full committee hearing on TikTok’s consumer privacy and data security practices, how the platform affects children, and its relationship with the Chinese Communist Party.” Restrictions could be a boon for American social media rivals, including Instagram Reels (META), YouTube Shorts (GOOG, GOOGL) and Snapchat Spotlight (SNAP), but Netflix (NFLX) was the biggest gainer yesterday as the media-stock rally ripped higher.
How the grilling started: “TikTok collects nearly every data point imaginable – from people’s location to what they type and copy, who they talk to, biometric data and more,” Committee Chair Cathy McMorris Rodgers said in opening remarks. “We do not trust TikTok will ever embrace American values – values for freedom, human rights and innovation. TikTok has repeatedly chosen a path for more control, more surveillance and more manipulation. Your platform should be banned.”
Former President Donald Trump already sought to ban TikTok and force a sale of its U.S. business to an American company, and while a transaction with Oracle (ORCL) almost went through in 2020, the lawsuits piled up and an injunction was granted to prevent the app from being outlawed. The Biden administration later revoked the planned ban, ordering a national security review in its place, but Chinese tensions and data privacy concerns eventually swept both sides of the aisle. Congress has passed a bill to outlaw the app on federal devices, as well as a probe from CFIUS and even proposed legislation to ban the app in the U.S. (note that all American social media networks are blocked in China). Check out Wall Street Breakfast’s prior survey on whether TikTok should and will eventually be restricted.
SA commentary: “This ban, if it materializes, is more about tomorrow than today for the likes of Meta Platforms,” wrote Tradevestor, in an article entitled, What A TikTok Ban Could Mean. Other SA contributors, like Bluesea Research, explore what competition or a ban would mean for Google (see Global Trends Provide A Massive Tailwind), as well as Julian Lin, Investing Group author of Best Of Breed Growth Stocks, on what effects recent developments are having on Snap (read Risks Are Rising But Stock Is Cheap). (66 comments)
Spillover risk
“Looking ahead, the longer that financial conditions remain tight, the greater the risk that stresses spread beyond the banking sector, unleashing greater financial and economic damage than we anticipated,” Moody’s wrote in its latest credit conditions report, while fresh trouble rocked Deutsche Bank (DB) in premarket action. A day earlier, Treasury Secretary Janet Yellen said regulators were prepared to take additional actions to ensure Americans’ deposits are safe, after ruling out coverage of all uninsured deposits at U.S. banks. Meanwhile, emergency borrowing under the Fed’s two backstop facilities (Discount Window Lending + Bank Term Funding Program) reached another whopping $163.9B this week, similar to the $164.8B recorded last week (borrowing under the weekly discount window is typically under $10B). (24 comments)
Short report
Block Inc. (SQ), formerly known as Square, closed the session off nearly 15% on Thursday after becoming the latest target of Hindenburg Research. The short-seller claimed the company “overstated” its user counts and “understated” customer acquisition costs, but SA contributor Muhammad Umair flagged the stock a week earlier, in a technical analysis piece that assigned a Sell rating to SQ. Block responded to Hindenburg’s short report, calling it “factually inaccurate and misleading” and said it intends to work with the SEC to explore legal action. While the stock pared some losses on some analyst commentary, shares fell again in premarket trading, down 4.5% to $59 at the time of writing. (219 comments)
Difficult refill
It could take years for the U.S. to refill the Strategic Petroleum Reserve, despite previous plans by the Biden administration to buy oil back at under $72/bbl. Front-month Nymex crude (CL1:COM) for May delivery closed down 1.3% to $69.96/bbl on Thursday as uncertainty caused by the banking crisis weighed on crude prices. “This year it will be difficult for us to take advantage of this low price,” Energy Secretary Jennifer Granholm told a congressional panel, pointing to another upcoming sale of 26M barrels from the SPR, as well as storage site maintenance. The SPR currently holds 372M barrels, the lowest since 1983, after last year’s historic drawdown of 180M barrels. (64 comments)
Today’s Economic Calendar
8:30 Durable Goods
9:30 Fed’s Bullard: U.S. Economy and Monetary Policy
9:45 PMI Composite Flash
1:00 PM Baker-Hughes Rig Count
What else is happening…
JPMorgan (JPM), Citi (C) warn not to solicit clients from stressed banks.
Robinhood (HOOD) APY now exceeds U.S. average savings rate by 19x.
Charles Schwab (SCHW) says it could endure outsized deposit outflows.
Apple (AAPL) looking to spend $1B a year to release movies in theaters.
Accenture (ACN) to slash 19,000 jobs amid IT spending slowdown.
More cost cuts: Walmart (WMT) axes jobs at five fulfillment centers.
Micron (MU) climbs as anticipation for chipmaker’s results grows.
Ford (F) expects electric vehicle business will lose $3B in 2023.
Crypto clampdown: Ex-Terraform Labs CEO Do Kwon is arrested.
SEC warns of ‘significant’ risk of loss for cryptocurrency investors.
—————
Good morning. Happy Thursday.
The Asian/Pacific markets leaned to the upside. China, Hong Kong, South Korea, Taiwan and Thailand did well; India and Australia were weak. Europe, Africa and the Middle East currently lean down. Hungary and Saudi Arabaia are up, but the UK, Poland, the UAE, Finland, Switzerland, Portugal, Sweden and the Czech Republic are down. Futures in the States point towards a moderate gap up open for the cash market.
————— VIDEO: What Do Commodities Tell Us About Inflation —————
The dollar is up. Oil is down; copper is up. Gold and silver are up. Bonds are down.
Stories/News from Seeking Alpha…
A delicate balance
Policymakers at the Fed are treading a tightrope as they seek to balance their role as providers of stable prices and financial stability. The FOMC voted unanimously yesterday to raise the target for the federal funds rate by a quarter percentage point to a range of 4.75% to 5%, seeking a compromise between pausing its rate hike cycle due to the current banking crisis and prior expectations of 50 bps to counter stubbornly high inflation. It marked the ninth straight meeting that the central bank raised rates, though it’s far from clear what may lie ahead despite a press conference from Fed Chair Jerome Powell.
The transcript: “It’s possible that this [banking crisis] will turn out to have very modest effects – these events will turn out to be very modest effects on the economy, in which case – and inflation will continue to be strong, in which case, you know, the path will look – might look different. It’s also possible that this potential tightening will contribute to significant tightening in credit conditions over time, and in principle, if that – that means that monetary policy may have less work to do. We simply don’t know.”
Powell also reiterated that there continues to be “so much uncertainty,” though the 2023 dot plot was unchanged, predicting a year-end peak around 5.1%. Since “rate cuts are not in our base case,” that would suggest the Fed is only planning one more rate hike this year, which is unchanged from the last estimate in December. Language of “some additional policy firming” was used instead of “ongoing increases,” but the uncertainty factor hit equity markets, and further comments from Treasury Secretary Janet Yellen about uninsured bank deposits didn’t help the situation.
SA commentary: “The combined effect of Powell’s and Yellen’s remarks was to increase the concerns of market participants about the risk of a U.S. recession later in 2023,” wrote James Kostohryz, Investing Group author of Successful Portfolio Strategy. However, “there is a striking dissonance in financial markets’ pricing,” noted SA contributor Franklin Templeton Investments. “The prediction of sharp Fed rate cuts would suggest a deep recession, perhaps precipitated by a credit crunch or a more extensive banking crisis.” (258 comments)
Palm swipe
Hungry for a bread bowl, but forgot your wallet at home? Panera Bread has you covered. The café chain is piloting Amazon’s (NASDAQ:AMZN) palm-scanning technology in St. Louis, and hopes to expand the trial to a dozen or more locations over the next few months. Called Amazon One, the biometric scanners will be linked to Panera loyalty program accounts, and are already in use at Amazon-owned Whole Foods and Amazon Go stores, as well as some stadiums and arenas. When Amazon rolled out palm-scanning in 2020, it began partnering with Visa (V) to test out transactions, and discussed the project with Mastercard (MA), JPMorgan Chase (JPM), Wells Fargo (WFC) and Synchrony Financial (SYF).
Do your homework?
Bond investors were outraged this week after the shotgun wedding between Credit Suisse (NYSE:CS) and UBS (NYSE:UBS) wiped out $17B worth of so-called AT1 debt. The complaint was that while they were completely annihilated, equity shareholders – while they also lost a ton of money – received payouts at the stock’s takeover value, apparently in contradiction to the hierarchy of restitution. “The AT1 instruments issued by Credit Suisse contractually provide that they will be completely written down in a ‘viability event,’ in particular if extraordinary government support is granted,” Swiss regulator FINMA declared in a statement, though that clause of the prospectus was apparently left unnoticed by some of the most sophisticated players on Wall Street. U.S. bond investors are still preparing to sue the Swiss government over the debacle (PIMCO, for instance, reportedly lost some $340M as a result of the debt write-off). (4 comments)
Taking aim
The SEC’s crypto crackdown looks set to continue after Coinbase (COIN) revealed it had received a Wells Notice from the agency. Potential charges were not specified, but an enforcement action alleging violations of securities laws is expected, which may relate to the exchange’s spot market, staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet. Shares of Coinbase slid 14% AH on Wednesday following the news, but with the stock doubling this year, does it represent a buying opportunity? Check out the latest article from SA contributor Josh Arnold, author of Investing Group Timely Trader. (93 comments)
Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Chicago Fed National Activity Index
8:30 Current Account
10:00 New Home Sales
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
4:30 PM Fed Balance Sheet
What else is happening…
Deadly fungal infection sweeps across U.S.: What stocks may benefit?
Moderna (MRNA) CEO says COVID vaccine price hikes are appropriate.
New chapter? Toshiba (OTCPK:TOSBF) accepts $15B buyout proposal.
Bidders expected to table increased offers for Manchester United (MANU).
Norfolk Southern (NSC) grilling: Should rails investors be worried?
Starbucks (SBUX) changing of the guard has not quieted labor disputes.
Brazil President Lula says Petrobras (PBR) should suspend asset sales.
BOE decision on tap after Swiss National Bank raises rates by 50 bps.
Wells Fargo updates bank plays in Signature Picks portfolio.
Boston Beer (SAM) subject of Heineken (OTCQX:HEINY) takeover speculation.
—————
Good morning. Happy Wednesday. Happy Fed Day.
The Asian/Pacific markets posted solid gains. Japan, Hong Kong, South Korea, Taiwan and Singapore rallied more than 1%. Europe, Africa and the Middle East currently lean to the upside. Denmark, Turkey, South Africa, Hungary and Portugal are up; Russia is down. Futures in the States point towards a flat open for the cash market.
————— VIDEO: What Do Commodities Tell Us About Inflation —————
The dollar is down. Oil is flat; copper is up. Gold and silver are unchanged. Bonds are down.
Stories/News from Seeking Alpha…
Fedilemma
Leading up to the Federal Reserve’s March 21-22 monetary policy meeting, traders had been expecting the FOMC to ratchet up its key interest rate by 50 basis points because the economy appeared to be surprisingly robust. But then three U.S. banks failed – Silvergate Capital (SI), SVB (SIVB) and Signature Bank (SBNY) – and a fourth is teetering (check out the latest headlines related to First Republic (FRC)). That may have Fed policymakers rethinking their expectation for a rate hike today and their upcoming rate path, while the whole episode came during the Fed’s blackout period, creating even more uncertainty about what may lie ahead.
Backdrop: As a reminder, the Fed has increased its key rate for eight straight meetings, bringing the federal funds rate target range to 4.50%-4.75%, from 0.0%-0.25% in the past year, in its drive to push down inflation. Meanwhile, the core PCE price index, the central bank’s preferred inflation gauge, showed a jump of 4.7% Y/Y in February, up from 4.6% in January, but easing from 5.2% in March 2022. Don’t forget that efforts to shrink the bank’s balance sheet were upended last week, as financial institutions borrowed a whopping $153B from the Fed’s discount window (and $12B from the newly created Bank Term Funding Program), though assets from emergency lending tend to fall as soon as a crisis subsides, compared to holdings added under quantitative easing.
With regards to whether to hike or not, the decision won’t be easy. Inflation still remains very high and a pause now could signal there are deeper problems within the banking system. On the other hand, there are fears that the Fed is moving too far, too fast with its aggressive rate increases, and some see the current banking crisis as a direct result of tighter monetary policy. Ultimately, things will boil down to whether the financial stability problem has been limited to a handful of regional banks that has been successfully contained, or if something systematic has broken – with the possibility of the crisis morphing into something larger.
By the numbers: According to the latest Wall Street Breakfast survey, around 70% of the 1,740 respondents expect the central bank to go for a smaller 25 basis point hike, though 20% believe that the Fed will pause its hiking cycle (and about 10% still see the possibility of a 50 bps increase). Any surprises will surely jolt markets, so pay attention to the Fed’s dot plot – which will be published alongside its policy decision at 2 PM ET – as well as Jerome Powell’s press conference a half hour later. SA contributor James Baker expects the central bank chair to “emphasize the continuing strength in the employment, the Fed’s intention to make money available to any bank needing funds to meet deposit withdrawals, and the Fed’s continuing commitment to bring inflation down.” (84 comments)
Deposit runs
U.S. officials are prepared to take more actions if needed to ensure liquidity in the banking sector, Treasury Secretary Janet Yellen said yesterday during an American Bankers Association meeting in Washington, D.C. She defended federal regulators’ actions to protect the depositors of Silicon Valley Bank (SIVB) and Signature Bank (SBNY), saying “our intervention was necessary to protect the broader U.S. banking system.” While conditions have improved with aggregate outflows stabilizing, “similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.” Yellen also cited a need to re-examine current regulatory and supervisory regimes, and expressed worries over a last-minute deal to resolve the debt ceiling. (3 comments)
Meet Bard
Google (GOOG, GOOGL) has released its artificial intelligence chatbot for public use as it responds to the growing threat from rival projects at Microsoft (MSFT) and OpenAI. The Bard chatbot will be available to a limited number of users on a waitlist picked from those in the U.S. and the U.K., before Google offers it in more countries. The company is also learning from missteps of OpenAI’s ChatGPT and its own demonstration of Bard, by limiting the amount of interaction that can occur between Bard and users. Calling the situation a “code red” in February, Google AI chief Jeff Dean said the tech giant was moving “more conservatively than a small startup” since it has much more “reputational risk” in providing erroneous information. (31 comments)
Earnings swoosh
Shares of Nike (NKE) jumped 4% in after-hours trading on Tuesday after topping earnings expectations and touting inventory management actions. However, the gains didn’t hold, and the stock even ended the session down 2%. Management noted continued promotional activity that compressed margins by 330 basis points to 43.3% – disappointing against a 43.7% consensus expectation – and the sneaker giant said it would “continue to take a cautious approach in planning our business, leading with intentional financial and operational guardrails.” Inventories were also up 16% to $8.9B compared with the year-ago period, while China continues to remain a sore spot for Nike, with sales declining 8% Y/Y across the region. (22 comments)
Today’s Economic Calendar
7:00 MBA Mortgage Applications
10:30 EIA Petroleum Inventories
2:00 PM FOMC Announcement
2:30 PM Chairman Press Conference
What else is happening…
Sticker shock: UK inflation rate unexpectedly rebounds to 10.4%.
PIMCO said to lose $340M from Credit Suisse (CS) AT1 debt writeoff.
GameStop (GME) surges after meme player records a surprise profit.
DWAC on watch with Trump expected to be formally indicted today.
Vote of confidence ahead of court ruling on SEC-(XRP-USD) case.
Ford (F) brings an all-electric Explorer to European markets.
Dodge (STLA) unveils its last super-fast gasoline muscle car.
Intel (INTC) shakes up leadership, announces new foundry leader.
These stocks are picking up Bed Bath & Beyond’s (BBBY) lost market share.
—————
Good morning. Happy Tuesday.
The Asian/Pacific markets posted solid gains. China, Hong Kong, India, Taiwan, Australia, Indonesia, Singpore, Thailand and the Philippines all did great. Europe, Africa and the Middle East are currently up big. The UK, Denmark, France, Poland, Germany, Greece, Russia, Finland, Switzerland, Norway, Hungary, Spain, the Netherlands, Italy, Portugal, Israel, Austria, Sweden, Saudi Arabia and the Czech Republic are up more than 1%. Futures in the States point to a moderate gap up open for the cash market.
————— VIDEO: This is a Fantastic Time to Learn Trading —————
The dollar is down. Oil and copper are up. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
Insurance assurance
Officials at the U.S. Treasury Department are reportedly studying ways to guarantee all bank deposits if tremors in the banking system spiral into a full-blown financial crisis. Authorities don’t yet see full FDIC coverage as necessary, but they are exploring a legal framework using emergency powers that wouldn’t require passage through a deeply divided Congress. The fear is that if another regional lender fails, there will be a run on deposits at smaller banks, knocking the industry over and sending billions of dollars to their bigger competitors. Here are the top 10 financial stocks, according to SA’s Quant Ratings
Backdrop: The FDIC has already backstopped the uninsured client deposits of Silicon Valley Bank (SIVB) and Signature Bank (SBNY), while crypto-focused Silvergate (SI) was left to liquidate and Credit Suisse (CS) was rescued by Swiss authorities and UBS (UBS). Some support is building for a motion to guarantee all bank deposits, as a fifth bank – First Republic (FRC) – teeters on the brink of insolvency. Shares of the lender tumbled 47% on Monday after a series of downgrades by S&P, but recovered as much as 21% in premarket trading as investors swallow an aid proposal led by JPMorgan (JPM) CEO Jamie Dimon (prior reports also suggested it was exploring a sale).
Where things stand? Some Republican lawmakers, like Rep. Patrick McHenry (R-NC), chairman of the House Financial Services Committee, are weighing changes to the current $250,000 FDIC insurance cap, as well as Democratic ranking member Maxine Waters (D-CA). Others are more against a universal guarantee on all bank deposits, like the conservative House Freedom Caucus, which feels that the “dangerous precedent that simply encourages future irresponsible behavior [would] be paid for by those not involved who followed the rules.” It comes after the Mid-Size Bank Coalition of America penned a letter to U.S. Treasury Secretary Janet Yellen to extend FDIC insurance on all deposits to “restore confidence among depositors before another bank falls.”
SA commentary: “Everywhere you look, the government is handing out money to the banks,” writes contributor Mark Grant. “In fact, U.S. banks have borrowed a combined $164.8 billion from the two backstop facilities provided by the Fed, eclipsing the money that was borrowed during the 2008/2009 financial crisis. The effects of this will be wide-ranging, including real estate loans, corporate loans, personal loans, mortgages, credit card interest rates, the U.S. Prime Rate, and every other type of lending that you can consider.” Check out the full article, The Banking System – The Heat Is On. (20 comments)
Robotaxi expansion
General Motors’ (NYSE:GM) Cruise is making headway in the self-driving race after applying for permission to test its autonomous vehicles across all of California (see the fine print here). It was only a year ago that Cruise launched the first commercial, driverless ride-hail service in a major U.S. city after inking the appropriate permits in San Francisco. To date, Cruise has logged more than 1M driverless miles, 833K trips across the Golden Gate Bridge, and 994 road trips in other testing areas like Phoenix and Austin. In terms of its fleet, Cruise currently has 300 self-driving vehicles in service, with GM shelling out around $2B a year to grow its autonomous subsidiary as part of CEO Mary Barra’s plan to double the automaker’s revenue by 2030. (2 comments)
Fresh supply
Russia has surpassed Saudi Arabia to become China’s top oil supplier, according to government customs data, with imports rising 23.8% to 1.94M barrels per day in the first two months of 2023. That may help shed some light on Xi Jinping’s visit to Moscow this week, though it also reflects the economics of cheaper Russian crude, with Western sanctions leading to steep discounts on Urals grade cargoes. General Chinese-Russian trade has also soared since the invasion of Ukraine as the two countries build on a “no-limits” partnership proclaimed at the 2022 Beijing Olympics. Ahead of Xi’s visit, Vladimir Putin expressed a willingness to discuss China’s peace plan for ending the war in Ukraine, though U.S. Secretary of State Antony Blinken said that the “world should not be fooled” by the blueprint, which would “freeze” in place territory seized by Russian forces. (14 comments)
More to come?
Amazon (NASDAQ:AMZN) is eliminating another 9,000 positions in coming weeks, marking the latest round of job cuts that adds to the 18,000 layoffs announced in January. The new cuts are mainly focused in AWS, advertising, Twitch, and People Experience and Technology Solutions divisions. “Given the uncertain economy in which we reside, and the uncertainty that exists in the near future, we have chosen to be more streamlined in our costs and head count,” CEO Andy Jassy declared, explaining why he didn’t announce both batches of layoffs at the same time. Amazon’s total headcount more than doubled from 2019 to 2021, peaking at over 1.6M. As of the close of 2022, total headcount had dipped to about 1.54M. (81 comments)
Today’s Economic Calendar
FOMC meeting begins
10:00 Existing Home Sales
1:00 PM Results of $12B, 20-Year Bond Auction
What else is happening…
Survey results: 70% of WSB subscribers see 25 bps rate hike tomorrow.
Narasimhan takes over as CEO of Starbucks (SBUX) ahead of schedule.
Virgin Orbit (VORB) reportedly drawing up plans in case of insolvency.
Wrong size? Analysts pan Foot Locker’s (FL) aggressive earnings guidance.
Moderna (MRNA) eyes ~$130 price tag for COVID vaccine in the U.S.
Canadian cannabis players like Aurora (ACB) hit 52-week lows.
Florida Governor Ron DeSantis calls for ban on CBDCs.
Iron ore plunges on China warning, Tangshan production controls.
Warner Bros. (WBD) ‘Shazam’ sequel disappoints with $30.5M opening.
Intel (INTC), AMD (AMD) stand out as chip expectations remain mild.
Ally Financial (ALLY) gains amid vague Buffett takeover speculation.
—————
Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets posted across-the-board losses. Japan, China, Hong Kong, South Korea, India, Australia, New Zealand, Malaysia, Indonesia, Singapore and Thailand were all down moderately or big. Europe, Africa and the Middle East are currently mostly up. Denmark, France, Germany, Russia, South Africa, Hungary, Italy and Sweden are up; Turkey and the UAE are down. Futures in the States point to a positive open for the cash market.
————— VIDEO: This is a Fantastic Time to Learn Trading —————
The dollar is down. Oil is down; copper is up. Gold and silver are up. Bonds are down.
Stories/News from Seeking Alpha…
Crisis takeover
Another wild weekend has seen regulators attempt to stave off a banking crisis that’s quickly spreading across global markets. In an emergency deal brokered by Swiss authorities, UBS (NYSE:UBS) agreed to scoop up longtime rival Credit Suisse (NYSE:CS) for $3.25B, which was less than half of the latter’s market valuation at the close of trading on Friday. Without a deal, Credit Suisse would’ve likely collapsed this week, spreading further financial contagion that began in the U.S. with the implosion of Silvergate Capital (SI), Silicon Valley Bank (SIVB) and Signature Bank (SBNY) (First Republic (FRC) is also facing trouble with additional cuts to its ratings).
What’s in it for UBS? By swallowing Credit Suisse, the bank has the opportunity to “scale up materially and instantaneously bringing on significant additional AUM and AUS,” wrote SA contributor IP Banking Research, predicting the deal ahead of the announcement and calling it a shotgun wedding. “Operational leverage and significant synergies that can be derived would be exceptionally high and UBS would likely only need to pay a token amount,” he continued. One of the biggest factors for UBS is also the fact that the Swiss government now has its back after it “managed to negotiate the deal of the century.”
Market sentiment took a turn for the better following the emergency rescue, which would limit contagion through the financial system, only to drop lower as things were fully digested. With big losses on tap for shareholders and bondholders, the Fed, ECB and other major central banks took “coordinated action” to ensure dollar liquidity, while the Swiss National Bank promised access to liquidity facilities for both banks involved in the transaction. In premarket trading, UBS (UBS) and Credit Suisse (CS) opened down 11% and 59%, respectively, with regulator FINMA adding that about $17B worth of Credit Suisse’s risky AT1 bonds will become worthless to guarantee that private investors help bear some of the costs.
Outlook: Market participants are hoping that the game of whack-a-mole in the latest banking crisis will end well, but there are deeper considerations at play in terms of the health of the overall economy. While moves by the government may limit wider contagion among financial institutions, tightening standards among lenders, greater scrutiny and raising capital ratios all have the potential to slow economic activity. Combined with higher interest rates from the Federal Reserve, it can all but guarantee a coming recession, but what other options does the central bank have as it looks to vanquish inflation? (47 comments)
Buffett getting involved?
Billionaire investor Warren Buffett has reportedly been in contact with senior officials in the Biden administration in recent days regarding the regional banking crisis. Note that the Oracle of Omaha has been a savior to the banking sector in the past. The chairman of Berkshire Hathaway (NYSE:BRK.B) invested $5B in Bank of America (BAC) in 2011 as he tried to bolster the bank due to its losses tied to subprime mortgages, and also came to the aid of Goldman Sachs (GS) in 2008. Elsewhere, a group representing mid-size U.S. banks sent a letter to the FDIC asking the agency to ensure all bank deposits for the next two years as debate takes place over the current cap of $250K. (312 comments)
Grain deal
An agreement that allows Ukraine to export grains from Black Sea ports has been renewed beyond its March 18 deadline. While Ukraine officials said the pact was renewed for another 120 days, a spokesperson for Russia’s Foreign Ministry announced it agreed to a 60-day extension, after warning that a lengthier extension would depend on the removal of some Western sanctions. The Black Sea grain agreement has allowed more than 25M tons of crop shipments from Ukraine since it was first brokered by the United Nations and Turkey last July, and before its renewal, Chicago wheat futures (W_1:COM) scored their first weekly gain in five. Chinese leader Xi Jinping also arrived in Moscow today for a three-day visit amid fresh ground offensives by Russian forces in a grinding war of attrition. (11 comments)
Winners & losers
The banking crisis has seen some interesting winners and losers, and more will be revealed (or change) as new developments play out. While equities are still making up their mind, traders have been fleeing financial stocks to snap up safe-haven assets like bonds, gold and even crypto. The yellow metal has rocketed to over $2,000 an ounce, while Bitcoin (BTC-USD) breached the $28,000 level for the first time since June 2022. On the other side of the fence is WTI crude oil (CL1:COM), which just fell to $65/bbl, after closing out its worst weekly loss in nearly three years. (55 comments)
Today’s Economic Calendar
No events scheduled
What else is happening…
Fed, Treasury support Swiss authorities’ moves on financial stability.
NY Community Bancorp (NYCB) unit buys Signature Bank (SBNY) deposits.
Boeing (BA) to make 184 Apaches for U.S. Army and global customers.
Calling for protest, Trump says he expects to be arrested on Tuesday.
Macron’s leadership at risk as tensions grow over French pensions.
Pfizer (PFE) CEO Bourla pockets $33M for 2022 after 36% pay hike.
TikTok’s ‘moment of truth’ is coming and fallout could spread far and wide.
Microsoft (MSFT) offers remedies in EU deal review of Activision (ATVI).
Silicon Valley Bank (SIVB) called a ‘hedge fund in drag.’
Housing market slump to worsen on mortgage rate volatility – Fitch.
—————