In today’s briefing:
- Equity Watch: Fire-Sale or Outright Fire in US Bank Stocks
- US: Elevated Inflation and Tight Labour Market to Force Hikes Despite Bank Turmoil
- UK: Inflation’s Bad Romance
- CX Daily: Why China’s 2023 Fiscal Policy May Be Less Expansionary Than It Seems
Equity Watch: Fire-Sale or Outright Fire in US Bank Stocks
- Confidence in the US banking system has been under immense stress, and some contagion crossed the Atlantic and struck Europe as well.
- At the moment, all banks are trading below their 52w highs – some more notably than others (median -25.82%).
- Deposit flights are driven by the inverted yield curve and particularly regional banks are vulnerable to it.
US: Elevated Inflation and Tight Labour Market to Force Hikes Despite Bank Turmoil
- With CPI inflation still 6%YoY and core CPI +5.5%YoY (annualised 6%MoM) in Feb’23, the Fed will be obliged to hike 25bp, and likely also reintroduce a reserve requirement for banks.
- Unemployment at 3.6% is far below the long-accepted NAIRU of 4.5%, reflected also in average wages still rising 4.6%YoY in Feb’23. M2 declined in Dec’22-Jan’23 but needs to contract more.
- A 50bp hike would’ve been warranted, but the collapse of 3 tech-related banks obliges the Fed to be a bit circumspect. The disappearance of CS can’t influence the FOMC decision.
UK: Inflation’s Bad Romance
- The increasing CPI and RPI rates to 10.4% and 13.8% defied UK disinflationary expectations. Price collection on Valentine’s Day isn’t much to blame.
- The upside news was worryingly broad-based, raising core inflationary pressures. An underlying impulse more than three times the target is painfully excessive.
- These data reinforce our hawkish view that the BoE needs to raise rates further to break the problematic second-round effects, despite financial stability risks.
CX Daily: Why China’s 2023 Fiscal Policy May Be Less Expansionary Than It Seems
Analysis: Why China’s 2023 fiscal policy may be less expansionary than it seems
Xi, Putin call for ‘responsible dialogue’ to end Ukraine crisis
Beijing’s deaths outrun births for first time in two decades
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