Banks continue to suffer on the LSE

The selloff that started on Friday after SVB’s collapse continued yesterday, as investors worried about the stability of banks, which fell 4.9% in the UK. The yield on 10Y Gilts fell 27bps and on 10Y Treasuries fell 20bps. Oil declined while gold rose. The FTSE 100 dropped 2.6%.

Investors are now assessing the probability that the Fed will put rate hikes on hold, or will choose to go with a 25bps interest rate hike. Some even predict a rate cut at the Fed meeting next week.

U.S. inflation data released at 1.30 pm today should give them more clues about the Fed’s decision on March 22.

The FTSE 100 was down 0.5% this morning, U.S. President Joe Biden said the US financial system is safe after authorities acted to protect deposits from customers, but there are still worries about potential contagion to other financial institutions. British banks were down 0.8% this morning.  

HSBC fell 1.2% after reports it is planning to inject 2 billion pounds into SVB's UK division that it just took over.

 

Things to read today:

 SVB collapse forces rethink on interest rates and hits bank stocks (Financial Times)

Fed Battle Plan for Inflation Shredded by Financial Turmoil (Bloomberg)

Fed Interest Rate Path Called Into Question (WSJ)