Another important week this one as we have US inflation data and retail sales, additionally we have the ECB expected to raise rates.
Last week’s news was mixed as Non-Farm payrolls showed an unexpected increase in hirings, although the unemployment rate increased. But this data was over shadowed by the failure of Silicon Valley Bank which took stock markets sharply lower. Whether its collapse causes systemic risk within the banking sector is yet to be seen; indeed if it does then the lessons from 2008 will not have been learned.
The bank collapse is being seen as a test for the FED as to whether the speed and magnitude of rate rises are causing these issues – although if a bank cannot manage its liabilities then its probably been in the wrong business. But it’s another hit for the crypto world as SVB held accounts for several digital coin companies and was a lender to the sector.
The flight to quality took gold higher and as the market bought US Government bonds yields dropped by 0.3% on the 10 year and the market reacted by moving from seeing the next raise as 25bps instead of 50bps as they believe this will force the FED to reappraise but the FED’s main mandate is to control inflation not save lenders who fail.
But the situation will be clearer after the weekend and as mentioned we do have inflation figures from the States which are expected to show a slowing of inflation rate.
China, having reduced growth rate prospects, have industrial production figures to give the market the extent to which the economy is rebounding after the Covid restrictions have been removed, but recent video of Chinese ports with empty containers and no ships at dock is unlikely to give much comfort.
Commodities were mixed with oil trading around the $80 level with the range since November in tact, copper arrested a two week long slide but unless we see higher than expected Chinese industrial figures is likely to remain under pressure.
Palladium still can’t find much investor interest nor industrial demand and continues to struggle.
Core inflation rate YoY
Inflation rate YoY
ECB rate decision
Initial Jobless Claims
Inflation rate YoY
Industrial Production MoM
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