US equities ended the last session of the week lower, as pressure returned to the banking sector. Despite the downturn, the S&P 500 and Nasdaq posted solid weekly gains, even while contending with the volatility over the past week and a half. Meantime, European equity markets underperformed markets in the US, with the Euro Stoxx 50 Index down 3.0% for the week after the Euro Area bank index shed 11.9%, the most in a year. 

Summary as at 20.03.2023 

  • Most Asian equities fell on Monday as emergency liquidity measures and bank consolidations in US and Europe did little to stem fears of a potential banking crisis. Bank-heavy indices once again saw steep losses, with the Nikkei 225 down 1% while Australia’s ASX 200 index was also battered by losses in the country’s big four banks. The Hang Seng plummeted 2.6%, with HSBC Holdings plc down nearly 6%. Mainland Chinese equities were the Shanghai Composite rising 0.1%, after the People’s Bank unexpectedly cut its reserve requirement ratio for local lenders. 
  • European and US equity markets are set for a muted start later today as traders mull efforts to restore calm in financial markets. 
  • Oil prices fell on Monday, reversing early gains as anticipation of a Federal Reserve meeting and concerns over weakening demand this year largely offset measures by major central banks to ease market fears of a looming banking crisis. Crude markets were nursing their worst weekly loss this year as investors sold heavily on concerns that an economic slowdown this year will hinder oil demand. 
  • UBS agreed to buy Credit Suisse in a historic, government-brokered deal aimed at containing a crisis of confidence that had started to spread across global financial markets. The Swiss bank is paying $3.3 billion for its rival in an all-share deal that includes extensive government guarantees and liquidity provisions. The price per share marked a 99% decline from Credit Suisse’s peak in 2007. UBS was seen as a winner in the transaction given Credit Suisse’s crown jewel – its profitable domestic bank in Switzerland – may be worth multiples of the overall purchase price. 
  • Investors in Credit Suisse’s riskiest bonds, known as AT1s, worth $17 billion are set to be wiped out as a result of the UBS acquisition – potentially sending that $275 billion market for bank funding into a tailspin. Some Asian banks’ additional tier 1 bonds fell by a record Monday morning following the news. 
  • The Federal Reserve and five other central banks announced coordinated action Sunday to boost liquidity in US dollar swap arrangements. Central banks involved in the dollar swaps will “increase the frequency of 7-day maturity operations from weekly to daily,” the Fed said in a statement coordinated with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank. 
  • The case for the Federal Reserve to forgo an interest-rate hike when it meets on Wednesday strengthened in the eyes of some central bank watchers following the coordinated global move to ease growing financial strains. The Bank of England also meets this week. Economists expect it to push through yet another increase in interest rates, one of the key events set to shape a turbulent week for the UK economy and Prime Minister Rishi Sunak. 
  • The University of Michigan consumer sentiment for the US dropped for the first time in four months to 63.4 in March from 67 in February, which was the highest reading in nearly a year, and well below forecasts of 67, a preliminary estimate showed. Elsewhere, industrial production was unchanged in February, also missing market expectations of a 0.2% increase after rising by 0.3% in January. Meantime, capacity utilisation remained unchanged in February at 78.0%, a rate that is 1.6 percentage points below its long-run average.   
  • FedEx Corporation reported adjusted fiscal Q3 EPS of $3.41, above the $2.71 average estimate, as revenues fell 5.9% year-over-year to $22.2 billion, versus the Street’s forecast of $2.7 billion. The company cited success in its cost-cutting measures to offset continued weakness in demand. It reiterated its plans to make more than $4 billion in cost reductions by the end of the fiscal year 2025. As such, it upped its full-year 2023 guidance to a range of $14.40 and $15.20, compared to the Street’s forecast of $13.56. 
  • After last week’s turmoil, investors will continue to monitor the situation in the banking sector and await monetary policy decisions from major central banks including the Fed, Bank of England, and the Swiss National Bank. Also, in the spotlight will be inflation figures for Japan, the UK, and Canada, and the Zew Economic Index for Germany. Finally, PMI data for the US, Japan, UK, Euro Area, Germany, and France should provide some details about the health of the manufacturing and services sector in March.