Markets closed down again on Friday, as the banking crises, looms large. Swiss National Bank has offered US$54 Billion in support for Credit Suisse Bank and a conglomerate of US Banks, are assembling a US$30 Billion support package for US Banks with liquidity issues, namely the First Republic Bank. The initial announcement of both support packages was met with market enthusiasm on Thursday, but this quickly turned sour again Friday, with both Credit Suisse and First Republic tanking on the share market. The Fed and the ECB will be meeting behind closed doors 24/7, over the weekend (with the appropriate Treasury officials), to cauterise the crises. This will quickly spiral out of control, if the authorities do not act immediately, definitively and with certainty . The Central Banks are looking to calm depositor fears and then introduce their ultimate solution (and long-held goal), Central Bank Digital Currencies (CBDC).
In Europe, the latest CPI number was released and inflation remains at extremely elevated levels, putting the ECB firmly between a ‘rock and a hard place’. Central Banks must hold their collective nerve, to drive inflation out, but the banking crises is putting additional pressure upon them, to pause and add liquidity. If the contagion spreads, then Central Banks will be forced into ‘bail-out/in mode’ and that will only amplify inflationary pressures. European and US bond yields are collapsing and so is the price of oil, indicating a recession is fast approaching, if not here already? The University of Michigan Economic Sentiment report, was also released in the US on Friday, which also made for some depressing reading. The coming week will be a big test for markets and in particular the Banking Sector, with both the Federal Reserve and the Bank of England meeting to consider monetary policy and interest rates, affirming measures to resolve the banking situation.
Commodity currencies are being buffeted by bond yields collapsing and volatile reserve currency moves. The AUD is looking to regain 0.6700, while the NZD trades well below 0.6300. All eyes will be on banking shares and Central Banks. Look for queues outside banks as a clue to trouble, a canary in the coalmine, if you like. Never a dull moment on the markets and none more so than present!