Morning Minutes

Banking Problems Drag World Markets Downward While Gold Rallies




It has been a good news, bad news evening and morning for banks and the markets. On the positive side, the Fed and the US Government stepped in with a plan to backstop depositors at Silicon Valley Bank in a bid to shore up confidence in the banking system and put an end to weekend runs on banks.

On the negative side, US regulators had to step in and support a second bank, New York based Signature Bank, known for cryptocurrency lending, and over in the UK, HSBC stepped in and took over Silicon Valley Bank UK. Even with the backstop, a number of US regional banks are getting hammered in premarket action, including First Republic down 64.7%, PacWest down 39.6%, Comerica down 19.8%, and Zions Bancorp down 18.2%.

US index futures were trading flat to moderately positive last night, but by the light of day today, some of that shine has faded. Dow Futures are down 0.6% while NASDAQ futures are up 0.2%. Overseas, the Dax is down 2.8%, the FTSE is down 2.4%, and the Nikkei is down 1.1%, but the Hang Seng rose 1.9%. Commodities are dropping this morning led lower by WTI Crude Oil falling 5.1% and Copper falling 2.3% suggesting concern over the health of the world economy has increased and the outlook for resource demand has weakened.

With stresses in the banking system potentially making it more difficult for the Fed to keep raising interest rates, the US 10-year treasury note yield has dropped toward 3.45% after trading in the 3.90s% most of last week. Gold has benefitted from capital looking for safer havens, rising 2.0%, while other currencies have benefitted from a general decline in the US Dollar with the Yen gaining 1.7%, while the Euro, Pound and Loonie are up 0.4%-0.5% so far today. Cryptocurrencies are on the rebound today with Bitcoin up 4.2% and Ethereum up 2.5% but they are still off from overnight highs.  

Away from the current banking crisis, it’s a busy week for economic news headlined by US consumer prices tomorrow, US retail sales and producer prices on Wednesday and a European Central Bank meeting on Thursday. It’s a quiet week for earnings with FedEx on Thursday being the most notable reporter.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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