Risk sentiment clouded again before the weekend, as banks once again led the share price losses. Deutsche Bank plunged 15%, the most since the early days of the March 2020 pandemic. Other European stocks also fell sharply, such as those of Commerzbank, Germany's second-largest bank. UBS shares fell not only because of pressure on the European banking sector, but also because of reports that it is one of the banks (Credit Suisse, actually) under investigation as part of a U.S. Justice Department probe into whether financial professionals helped Russian oligarchs. Short-term losses increased by panic selling went far – likely too far short-term.
U.S. banks, particularly regional banks, are also trading weaker, although U.S. Treasury Secretary Janet Yellen tried to reassure markets by saying she was prepared to take further steps to protect deposits if necessary.
We see that worries in the markets are on the rise again, which is also reflected in a sharp increase in the volatility measure VIX, also known as the fear index. Safe haven demand rose again as investors bought bonds and bond yields fell sharply again. The USD also managed to stabilize. The JPY rose to its highest level in six weeks. Gold remains near $2,000 but sees technical selling at this level.
We are also seeing strong outperformance from tech stocks, showing that there is an imbalance in the markets – similar to the 2008 financial crisis. As investors remain greedy and optimistic about interest rate cuts, we will likely continue to see dip buying.
However, it is worth noting that we are seeing stress in the markets as banks remain under pressure, especially smaller regional banks that cannot give interest to funds. The Fed is trying to reconcile the volatility problem with the ongoing banking crisis. At the same time, there are signs of recession, but consumer demand is still robust, as shown by better-than-expected Eurozone purchasing managers' indexes today.
Investors will also be looking for further signs of a slowdown in the U.S. economy in U.S. durable goods orders and U.S. PMI data later today. Solid data would stabilize Wall Street again – which is the more likely scenario.
The EUR and GBP were weighed down today by the stress in the European banking sector, but remain generally optimistic as the ECB continues to pursue a hawkish stance. The GBP “benefits” from very high inflation in the UK. However, the course will change quickly, including for the ECB if the Fed eases monetary policy again (later this year). The JPY remains bullish as the prospects of central banks moving away (from their hawkish stance) in light of the banking crisis increase.
👁 ROB'S MARKET OVERVIEW:
March 24 – 2023
🇺🇸 US Markets ↕️ (remaining volatile)
Cyclical Stocks ↕️
Tech/Growth Stocks ↕️
Financial Stocks ↕️/↗️ (slightly rebounding from sharp losses)
Defensive Stocks ➡️
Energy Stocks ↕️/↘️
💱 Forex
JPY↗️
CHF, USD ➡️/↗️
EUR, GBP ↕️ (Downside limited after sharp losses)
AUD, CAD ↘️
⚒ Commodity Markets ↕️
Oil prices ↕️/↗️ (after sharp losses, rebound likely)
Natural Gas prices ➡️/↗️
Metal prices ➡️/↘️
Precious Metal prices ➡️/↗️ (testing $2,000)
⚡️Cryptos ➡️/↘️
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Yours, Robert 🇪🇺🏦🔍🥵📉
