Volatility remained high throughout the trading day yesterday as the fall out of the SVB and Signature bank closures continued to reverberate around global markets. Investors remained concerned of potential contagion in the banking sector as another 70 billion was wiped of the value of bank shares taking the total to 170 billion over the last three days. Despite this concern, or more accurately because of it, the US indices closed the day mixed, the Dow down 0.28%, S&P down 0.15% and the Nasdaq up 0.45% as US rate hike expectation fell off a cliff relative to where it was just last week.
Treasury yields continued to tumble in a dramatic turnaround from the end of last week with the benchmark 2-year yield falling below 4% – on track at one point for the biggest drops since October 1987 and the Black Monday event. Market expectation is now standing at 57% for a 25-bps hike from the fed next week down from and 80% expectation of a 50% hike just a few days ago – crazy times indeed! Currencies had a whippy day within recent ranges with the dollar remaining on the back foot in line with the moves that we have seen in yields. Once again traders are braced for more volatility as the market tries to work out where fair value is after all the recent events. Just to add to the complications, CPI data is due out in the US tonight.
Looking at the rest of the day’s trading sessions and the Asian session is relatively quiet in terms of data releases. The London session see’s the latest employment numbers released in the UK which should add to volatility in the sterling products, but the main event of the day is the CPI data release in the US. Market expectation sits at 0.4% m/m and 6.0% for the yearly number and given the moves we have seen over the last few days, expect a big impact across products if this number throws another spanner in the works!
