Global Markets News Round-up to start your day: 10/08/23

Credit Suisse is facing a tough time as its shares dropped by as much as 15% following client outflows and poor earnings. The bank saw a staggering $120 billion of funds being pulled out last quarter and a net loss of $1.5 billion. Debt and equity traders generated only $96 million in the quarter, a drop of 84% and 96% respectively, compared to $2.65 billion in early 2021. The bank attributed the decline to the impact of credit downgrades and its decision to exit the hedge funds business. However, CEO Ulrich Koerner stated that the bank is restructuring quickly and promised a return to profit next year. Despite this, JPMorgan is still concerned about the future of the trading operation.

Meanwhile, Trafigura is facing a loss of $577 million after nickel cargoes purchased were found not to contain the metal they were supposed to. This has led to the company uncovering what it believes is systematic fraud and has led to the head of nickel and cobalt trading leaving and the company starting legal action against Indian businessman Prateek Gupta.

In other news, German inflation has slowed down to its lowest pace in five months in January, while the BOE Governor warned of potential risks in the UK. 

Meanwhile, the Riksbank in Sweden has raised its interest rates to 3% and is targeting krona speculators with a bond-sales plan. The earthquake in the region has resulted in thousands of foreign aid workers arriving in Turkey and the death toll in the region is close to 18,000. Turkish assets are recovering after days of decline.

Special feature – Rolling recession:

rolling recession,” which is a hybrid between a hard landing (full-blown recession with job losses) and a soft landing (slowdown in the economy without major job losses). In a rolling recession, industries take turns contracting while the economy as a whole avoids a sharp contraction and the labor market largely remains intact. Housing was the first sector to be impacted, followed by manufacturing. The COVID-19 pandemic had already put homebuying out of reach for many Americans, and the rapid interest rate increases by the Federal Reserve made housing even more vulnerable. The decline in factory production was due to weak US exports, a shift in consumer spending from goods to services, and job cuts in tech companies. Despite these developments, the economy has not taken a major hit as consumers remain resilient. Savings built up during the pandemic and a vibrant job market have cushioned the blow of higher prices. It remains unclear what the future holds, but some analysts believe the rolling recession could continue, extending into the service sector while inflation drops further. Others are skeptical and believe the US may experience a downturn due to growth and inflation remaining elevated. It is too soon to say for certain which scenario will play out.

Markets yesterday:

Stocks in Asia declined as US equities saw a second day of drops and Treasury bonds slipped as investors braced for higher interest rates as the Federal Reserve battles inflation. 

An Asia equity benchmark (MXAP) was on track for a second consecutive weekly decline as shares fell in China, Australia, and South Korea. 

Futures on US equity contracts also declined after the S&P 500 and Nasdaq 100 dropped on Thursday. 

Japan saw stock gains, however, supported by positive earnings from chipmakers. Treasury yields across the curve continued to rise as investors signaled a lack of confidence in the economy’s ability to withstand further Fed hikes. The yen has been fluctuating as Japan prepares to announce a new Bank of Japan governor on February 14th. 

The US inflation update next week is seen as a potential inflection point for the Treasury yield curve. Market pricing for US rates to peak in July increased as central bankers signalled further tightening ahead. 

The dollar was largely unchanged in Asia trading, with the offshore yuan also range-bound. 

Chinese inflation data showed a 2.1% rise in consumer prices in January, in line with expectations. 

Bond yields in Australia fell slightly after the central bank raised its forecast for core inflation this year, highlighting the need for higher borrowing costs. 

Meanwhile, Lyft’s shares dropped by 30% in after-hours trading due to an earnings outlook that missed analyst estimates, while Tesla’s stock price rose two-thirds this year. Alphabet’s shares fell further due to concerns about its AI chat bot. 

Bitcoin steadied after Thursday’s 4.8% decline, with speculation about a regulatory crackdown, while oil trimmed a weekly gain amid global economic slowdown concerns. 

Global indices at 5:45am UKT:

Gold remained near its lowest close in over a month.

Dow Jones: 33,699.88 (-0.73%)

NASDAQ: 11,789.58 (-1.02%)

FTSE100: 7,911.15 (+0.33%)

CAC40: 7,188.36 (+0.98%)

Sensex: 60,672.69 (-0.22%)

Nifty50: 17,862.05 (-0.18%)

Nikkei225: 27,647.81 (+0.23%)

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