European stocks traded lower on Thursday as investors looked to
the Bank of England's likely rate hike and continued digesting the
Federal Reserve rate move and Jerome Powell's comments.
"We think that today, just like the Fed, the BOE will be hiking
the interest rate for the very last time, and we do not anticipate
any other increases in interest rates in the future months or even
quarters," Zaye Capital Markets said.
The BOE is expected to follow rate hikes from the central banks
of both Switzerland and Norway.
Read Swiss Central Bank Lifts Key Rate, Declares End to Bank
Read Norway Central Bank Raises Key Rate to 3.0% and Lifts Rate
Stocks to Watch
European banks are highly liquid and have a diverse base of
funding, but they could see that liquidity start to decline,
Deutsche Bank said.
The repayment of liquidity facilities and the decline in central
bank balance sheets are likely to tap into excess liquidity, it
"Maintaining the same level of excess liquidity but with smaller
central bank reserves we expect will be more costly for banks going
forward. But it will likely only be a partial offset to the
continued benefit of rates rising."
Siltronic has no material catalysts to look forward to in the
coming months as end-market demand remains sluggish, Jefferies
Shipment delays caused by high customer-inventory levels and
higher costs are weighing on Siltronic's operational performance,
and the German manufacturer of microchip parts says it expects a
weaker market ahead, it added.
"Medium-term, we remain optimistic, particularly given the
growing silicon content in consumer electronics, EVs, and industry,
as well as the capacity expansion of semiconductor
Jefferies downgraded its rating on the stock to hold from buy
and reduced its target price to EUR75 from EUR95.
Stock futures were firmer as investors reassessed the market's
negative reaction to events late in the previous session.
"There's been a bit of calm restored. A big part of it is that
the Fed has signaled that they're almost done," Kleinwort Hambros
SPI Asset Management said "yesterday's meeting was mainly in
line with expectations, with the markets suggesting there is now a
50:50 chance that the Fed could deliver one more 25bp rate hike in
"Still, there is elevated uncertainty around this expectation.
If financial and credit conditions deteriorate quicker than
anticipated and disinflation proceeds faster, the Fed could pause
or reverse tack on this tightening cycle."
Stocks to Watch
Coinbase was falling 10.8% in premarket trading after saying it
received a "Wells Notice" from the SEC, which warned that the
agency's staff had made a preliminary determination to recommend an
enforcement action against the crypto exchange.
First Republic Bank was rising 3.5% in premarket trading, while
fellow regional lender PacWest Bancorp gained more than 5%.
Economic updates set for release today include the Weekly
Jobless Claims, fourth-quarter Current Account, and New Home Sales
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Falls in the dollar could propel the euro rapidly above $1.10,
UniCredit Research said.
EUR/USD received a big boost, reaching a seven-week high of
1.0931, according to FactSet.
"This reopens the chance of a relatively rapid test of the
year-to-date peak of 1.1033 [in EUR/USD], with no major obstacle in
between," Unicredit said.
Once above 1.10, EUR/USD's path towards 1.12--UniCredit's
current target for this year--could also be quite smooth, with only
1.1073 as a notable resistance level, it added.
The dollar hit a seven-week low against a basket of currencies
and is likely to stay weak after the Fed raised rates, ING
"The dollar weakened on the back of the moderate dovish surprise
by the Fed yesterday, and reluctance from the Treasury to consider
an extension to the deposit insurance."
Sentiment towards the dollar should stay bearish especially
against European currencies, albeit with small corrections high
rather than a straight-line dollar depreciation, ING added.
The BOE may fail to offer much guidance on the future path of
interest rates in a decision later, leaving sterling vulnerable to
external developments, ING said.
The market is fully pricing in a 25 basis points rate rise for
Thursday's meeting and the BOE is likely to be divided over the
decision while potentially providing very little policy guidance
amid recent market turmoil, ING added.
"Ultimately, the pound may rapidly default to being driven by
external factors: primarily the banking situation and global risk
Read Sterling to Fall if BOE Signals Pause But Declines May be
The Swiss franc rose, turning higher on the day against the
euro, after the Swiss National Bank raised interest rates despite
the Credit Suisse troubles.
Measures taken by Swiss authorities, including the SNB, to
rescue Credit Suisse have "put a halt to the crisis," the SNB said
in a statement accompanying the rate decision.
Eurozone government bond yields were lower in early trade as
investors considered the approaching end of the Fed's
"The effect [of the Fed's rate rise] has been lower market
rates, in particular on the front end as the market takes on board
that the Fed seems to be almost done," ING said.
ING expects the disinversion of the bond curve to continue, it
said, adding that it has seen another material move in that
direction as a response to the Fed's decision.
Crude futures were slightly lower, having made solid post-Fed
gains. Despite the losses, analysts said demand for oil remains
strong and is likely to strengthen further.
"The Energy Information Association's weekly report highlighted
strong exports, while domestic fuel stockpiles declined," ANZ
Research said, adding that Asian demand also remained firm, while
the prospect of no more rate hikes this year was providing impetus
Read Big Oil Eyes New Deals in North Africa Amid Rising Energy
Base metal prices were mixed while gold rose more than 1%, as
investors reacted to a "dovish" Fed.
"This was a 'dovish hike', i.e., higher rates but with lower
projections, " Peak Trading Research said.
The dollar fell following indications from Jerome Powell that
fewer or possibly no more rate hikes are set to happen for the rest
of this year, a bullish trend for commodity markets, Peak said.
Read Weaker Dollar Should Be a Tailwind for Commodities
DOW JONES NEWSPLUS
Swiss Central Bank Lifts Key Rate, Declares End to Bank
Switzerland's central bank raised its key interest rate Thursday
and said the country's bank crisis had ended, the latest sign that
policy makers are determined to press down on inflation despite
strains in the banking system.
The Swiss National Bank increased its key interest rate by a
half-percentage point to 1.5%, a move economists had expected
before the banking strains that started in the U.S. spread to
Switzerland. The central bank also indicated that it may again
raise its key rate later this year.
Norway Central Bank Raises Key Rate to 3.0% and Lifts Rate
Norway's central bank raised its key policy rate on Thursday and
said that it now expects the rate to peak at a higher level than
previously anticipated as inflation remains markedly above
Norges Bank increased its key policy rate by 25 basis points to
3.00%, as expected, and said that despite considerable uncertainty
about future economic developments, if things turn out as it now
expects, the policy rate will be raised further in May.
It Wasn't Just Credit Suisse. Switzerland Itself Needed
ZURICH-The chairman of Switzerland's largest bank received an
urgent call last week. On the other end were three top Swiss
officials who delivered an ultimatum dressed up as a proposal. UBS
Group AG needed to rescue its failing rival, Credit Suisse Group
For any country, it would be a financial emergency. For
Switzerland, the stakes verged on existential. Its economic model
and national identity, cultivated over centuries, were built on
safeguarding the world's wealth. It wasn't just about a bank.
Switzerland itself needed rescuing.
Bank of England Expected to Follow the Fed and Raise Key Rate.
Inflation Is Still a Worry.
The Bank of England is expected to raise its key interest rate
by a quarter point on Thursday, a day after the Federal Reserve
increased borrowing costs by the same amount.
The decision comes after weeks of worry about the health of
banks that has rocked financial markets worldwide. While that
threat to financial stability adds to forces that should bring down
inflation, the annual pace of price increases is still in double
digits in the U.K.-which gives impetus to the need for BoE Governor
Andrew Bailey to tighten policy further.
Deutsche Boerse Doesn't Plan Provisions After US Judgment on
Deutsche Boerse AG said it doesn't expect to make provisions
after a U.S. court awarded judgement to creditors that sought
transfer of around $1.7 billion attributed to Iran's central bank,
which the company's subsidiary Clearstream Banking SA held in
The German exchange operator said late Wednesday that the
decision doesn't change the overall risk that would require
Clearstream or the parent to make provisions. Clearstream is
considering appealing the decision, the company said.
Big Oil Eyes New Deals in North Africa Amid Rising Energy
CAIRO-After years of underinvestment in North Africa's energy
infrastructure, global oil-and-gas giants from Halliburton Co. and
Chevron Corp. to Eni SpA are ramping up their presence in the
region as demand from Europe grows.
Executives in the industry are betting it is worth drilling
again in some of the hardest places to do business in the world as
Europe increasingly turns to other sources for its energy needs
after shunning its main supplier, Russia, over the invasion of
Ukraine. In recent months, a string of European officials have
visited the region to help advance talks over potential supply
Russia Launches Attacks Across Ukraine, Killing Seven in School
Russia launched a new wave of missiles and armed drones into
Ukraine, shelling residential buildings in the south and killing
seven people in a school dormitory in the Kyiv region, hours after
China's president concluded a visit to Moscow to reinforce a
partnership with Russian President Vladimir Putin.
Rockets slammed into an apartment block in the southern
Ukrainian city of Zaporizhzhia on Wednesday, according to Ukrainian
officials and a video of the incident shared by Ukrainian President
Volodymyr Zelensky. One person was killed and at least 33,
including three children, were injured in the attack, according to
Macron Proposes Bonus for Workers in Bid to Calm Pension
PARIS-President Emmanuel Macron stood by his overhaul of
France's pension system on Wednesday but proposed several measures
for workers-including bonus payments for employees of companies
that buy back shares-in a bid to calm an escalating protest
movement against his government.
In his first public remarks since pushing through the overhaul
last week without a vote in Parliament, Mr. Macron said the law and
its centerpiece, raising the retirement age from 62 to 64 by 2030,
were needed to fix a pension system that would become unaffordable
in a matter of years. He said he wanted the law's provisions to
enter into force by the end of this year, defying polls that show
the public is largely opposed to the overhaul.
Pro Take: The Fed Hits Inflation With Ninth Rate Hike as Banks
The Federal Reserve on Wednesday stuck with its inflation fight
as banks and regulators sort out the Silicon Valley Bank mess that
has spread fear throughout the banking sector.
Its quarter-percentage-point interest-rate increase, though
smaller than most of the hikes seen over the last year, feels like
it packs more of a punch amid worries about the health of banks.
But Fed Chairman Jerome Powell made clear that the Fed, even though
it considered a pause, isn't bowing out of its inflation
Fed Hiked and So Did Silicon Valley Bank
Federal Reserve policy makers raised rates on Wednesday, but
they tried to do so in a kind way. Maybe that is the most important
The quarter-point increase in the Fed's target range was
largely, but not entirely, expected. With all the recent trouble in
the banking sector, some economists had forecast the central bank
would hit the pause button. Similarly, although interest-rate
futures put higher chances on a rate increase than not, they didn't
rule out a pause.
Macro Hedge Funds Hit by Financial Turmoil
Hedge funds that bet on big-picture market moves have been hit
with steep losses as a spate of recent bank failures upends bets
that interest rates would remain elevated.
The souring of the wager led some, including Maniyar Capital
Advisors and Haidar Capital Management, to lose more than 20% this
month. Many of the funds, which had notched big gains as rates
marched steadily upward in 2022, are now flat to down for the year
following a steep recent drop in Treasury yields. So-called
trend-followers, which try to take advantage of momentum in
markets, also were hurt.
What Does 'Made in America' Mean? In Green Energy, Billions
Hinge on the Answer.
Virginia-based power company AES Corp. says it is ready to push
the button on a solar-panel order of more than $1 billion if a
manufacturer will commit to building a factory in the U.S.
If that factory gets built, AES can buy its panels and apply for
federal subsidies recently made available to clean-energy
developers that use equipment made in the U.S.
Diesel Prices May Reflect Weakness in U.S. Economy
Diesel prices at the pump have fallen to their lowest in over a
year. That's good news for consumers, but the decline in prices for
the fuel suggests a gloomy outlook when it comes to the U.S.
"Diesel fuel is ubiquitous in our economy," says Brian Milne,
product manager, editor, and analyst at DTN. It's a "critical
component in industrial production and...supply-chain
SEC Plans Lawsuit Against Coinbase, According to Exchange
The Securities and Exchange Commission has told Coinbase Global
Inc. that it plans to take enforcement action against the company,
escalating its crackdown on digital-currency firms by targeting the
biggest U.S. crypto exchange, Coinbase said Wednesday.
Coinbase said it had received a letter from the SEC known as a
Wells notice, in which regulators say they believe companies or
individuals violated investor-protection laws. The notices aren't
final because the agency's commissioners must authorize any
lawsuits or enforcement settlements.
Fed Walks Tightrope Between Inflation and Bank Turmoil-but for
The Federal Reserve is responsible for the financial system and
the macroeconomy. In theory, these are different jobs calling for
The Fed is trying to stay faithful to that separation of roles.
On Wednesday, it continued its campaign to slow the economy and
bring down too-high inflation, with a quarter-percentage-point
increase in interest rates and a forecast of one more. Meanwhile,
though, it has been lending generously to banks through its
discount window to contain the damage caused by the failure of
Silicon Valley Bank two weeks ago.
Grand Jury Weighing Donald Trump Hush-Money Payment Scheduled to
A Manhattan grand jury considering Donald Trump's role in paying
hush money to a porn star is scheduled to meet Thursday, according
to people familiar with the matter, in what will likely be the
panel's last day of deliberations this week as it moves closer to a
potential indictment of the former president.
U.S. to Send Aging Attack Planes to Mideast and Shift Newer Jets
to Asia, Europe
The U.S. will send aging A-10 attack planes to swap for more
advanced combat aircraft in the Middle East as part of a Pentagon
effort to shift more modern fighters to the Pacific and Europe to
deter China and Russia, U.S. officials said.
The deployment of the A-10s, scheduled for April, is part of a
broader plan that also calls for retaining modest naval and ground
forces in the Middle East region.
TikTok CEO Seeks to Convince Congress Chinese-Owned App Isn't
WASHINGTON-TikTok CEO Shou Zi Chew testifies Thursday morning at
a high-stakes congressional hearing, as safety and security
concerns over the Chinese-controlled platform deepen even as its
popularity in the U.S. grows.
Mr. Chew, a Harvard-educated Singaporean army reservist and
former Goldman Sachs banker, will testify before the House Energy
and Commerce Committee, whose members have already signaled
concerns that Beijing could influence TikTok content and harvest
Ron DeSantis Clarifies Comments on Ukraine War, Calls Russian
WASHINGTON-Florida Gov. Ron DeSantis, a likely 2024 Republican
presidential candidate, sought to qualify his recent contentious
remarks that Russia's invasion of Ukraine was a "territorial
dispute" and not vital to U.S. interests.
"Well, I think it's been mischaracterized," he told broadcaster
Piers Morgan for an interview to be shown Thursday on the streaming
service Fox Nation. Mr. Morgan included the comments in a column
Wednesday evening for the New York Post.
Donald Trump Grand Jury Is Called Off for Wednesday
The Manhattan grand jury investigating Donald Trump's role in a
hush-money payment to a porn star was instructed not to meet
Wednesday, according to people familiar with the matter, delaying
any potential indictment of the former president.
The district attorney's office notified court officials Tuesday
night about the change in plans, the people said. The grand jury is
now scheduled to reconvene Thursday, according to the people. It
wasn't clear what prompted the change.
Federal Judge Concludes Trump Likely Misled Lawyers on
WASHINGTON-A federal judge found that special counsel Jack
Smith's team presented convincing evidence that President Donald
Trump misled his own lawyers about his retention of classified
documents after leaving the White House, according to people
familiar with the decision.
Judge Beryl Howell made that finding Friday in a sealed decision
siding with federal prosecutors in their bid to bypass
attorney-client privilege claims raised by one of Mr. Trump's
lawyers, Evan Corcoran, and compel him to provide more testimony.
Judge Howell wrote that prosecutors had made a "prima facie showing
that the former president had committed criminal violations," the
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(END) Dow Jones Newswires
March 23, 2023 07:06 ET (11:06 GMT)
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