Headlines

* SNB to provide up to $54 billion of liquidity to Credit Suisse

* Panic over bank turmoil sparks flight to safe haven currencies

* Australian employment rises more than expected in February

* Oil climbs from 15-month low after banking crisis roils market

* Europe, US futures rise on Credit Suisse funding from SNB

FX: USD jumped up over 1% higher as it acted as a safe haven amidst high volatility. Only the yen outperformed. The DXY was supported by the 50-day SMA, now at 104.38. Upside may be capped by the 100-day SMA at 104.88. The US Treasury 2-year yield plunged again to a fresh low at 3.72% yesterday. That yield was last seen in September last year. Bond prices move inversely to yields and are being sold this morning with the yields back up to 4%. The 10-year yield is hovering around its 200-day SMA at 3.5% after posting a fresh cycle low at 3.38% yesterday amid the tumult.

EUR had its biggest 1-day drop since September 2022. It lost over 2% at one point to 1.0516 before paring losses. GBP settled lower at 1.2057 but was a relative outperformer. There was a lack of fireworks from the Budget as many of the details were flagged before the speech. USD/JPY ended the day lower at 133.42 helped by safe haven flows. It bounced off its 50-day SMA again now at 132.51. AUD slumped to finish at 0.6619. The aussie is outperforming today after an uplift in employment. USD/CHF bounced off support below 0.91. It surged over 2%, back up above 0.93. The swissie was engulfed by selling and risks surrounding Credit Suisse.

Stocks: US equities were mixed but generally weaker as prices whipsawed.  The benchmark S&P 500 closed lower by 0.7% after another down day in banking stocks. It still remains below the 200-day SMA at 3938. The tech-heavy Nasdaq 100 closed higher by 0.42% and trades back above its 50- and 200-day SMA. The Dow lost 1.06%. The index initially lost around 725 points before rebounding. The KBW bank index was 3.6% lower. JP Morgan Chase, the world’s biggest bank by assets, lost 4.7%. Morgan Stanley and Citibank both ended more than 5% lower.  

Asian stocks are off their worst levels after Swiss authorities attempted to soothe market concerns. The Nikkei 225 retreated below 27,000 for the first time since January. The Hang Seng was in subdued mood amid frictions with the US over a TikTok ban.

US equity futures are in the green but have given back some gains. European equity futures are pointing to a higher open +2%. The Euro Stoxx 50 cash market closed down 3.5%.

Gold was choppy as yields and the dollar flip-flopped. It traded between $1885 and $1937 before closing at $1918. Prices this morning are a touch softer.

Day Ahead – Over to you President Lagarde

What a week to be holding an ECB meeting and rate decision. With fear of yet another bank failure, but this time a systemically important one, the SNB have done what was their only option late last night. Credit Suisse share are set to open up around 40% this morning. But the ECB meeting is the first critical test of whether falling confidence in banks will force a change in monetary policy.

There is now around a 50% chance of a 50bp rate hike. This is up from just 20% on Wednesday. Remember that Lagarde had clearly signalled the bank’s intention to hike by this amount at its last meeting. The ECB had been expected to stop raising rates at around 3% last night, though this has risen to 3.22% this morning.  Previous bets predicted a peak rate above 3.75%. Recent data remains strong with core inflation especially bugging the hawks. So, a hike in a still fragile environment risks exacerbating market stress. No rate move risks highlighting that the ECB are worried.

Chart of the Day – EUR under the spotlight   

The world’s most popular major, EUR/USD, traded to a one-month high at 1.0760 early yesterday. But the chaos at Credit Suisse saw European banks plunge and yields tumble. A fresh cycle low printed at 1.0516 as the 50-day SMA at 1.0726 acted as decent resistance again. A long-term Fib level (38.2% of the 2022 decline) sits at 1.0610.

The big red candle yesterday is the third leg of a bearish “evening star” pattern. That points to losses ahead. But strong support lies around 1.0537/60. Expect a lot of volatility at 1.15GMT on the ECB rate decision. The press conference starts at 1.45GMT.