Daily Market Commentary 9th August 2023

The volatile start to the trading week continued overnight. US equities plunged, following the big gains from Mondays open, with jitters coming from the banking sector. Italy was the latest European Country to impose a windfall profit tax on Banks, following Spain and Hungary. The rising interest rate environment has allowed banks, across the world, to add margin and profit from the steep rise in rates. The US is unlikely to follow suit, but the problems remain in the US Banking sector, following the Credit Ratings Agency Moody’s latest downgrades and warnings. Moody’s downgraded two regional Banks, ‘M&T Bank’ and ‘Pinnacle Bank’, while issuing a warning for ‘Bank of New York Mellon’ and ‘State Street Bank’. This sent warning signals throughout markets, with equities plunging and the US Dollar spiking. The EUR retreated to 1.0950, while the GBP slipped back to 1.2730.

The rising reserve and weak trade data from Asia, added to the downward pressure on commodity currencies, with the AUD falling to 0.6500, while the NZD dipped to 0.6040. Chinese and Taiwanese trade data indicated big falls in both exports and imports, while shipping volumes from Asia are plunging. The recession in Europe is hitting demand hard and this may spread to the US. Markets will be watching Chinese and US inflation data, set to be released over the next couple of days, following stubbornly high numbers from Germany (6.2%) overnight.