Markets remain nervous due to ongoing fears of banking contagion despite regulatory measures and the UBS takeover of Credit Suisse, which has rendered worthless $17 billion of Credit Suisse bonds.
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- Credit Suisse was close to failure but following the $54 billion loan from the Swiss National Bank, Swiss giant UBS has succeeded in taking over Credit Suisse. The deal has wiped out $17bn worth of CS bonds, roiling the corporate bond market and the banking sector generally. Markets remain nervous, with Asian stock markets falling strongly and US stock futures also broadly lower. The Chinese Hang Seng Index is trading today at a new 3-month low price.
- Attention is turning towards Wednesday’s meeting of the US Federal Reserve, with an emerging consensus expecting either no rate hike or only a 0.25% hike. An increasing number of analysts see this week as the final potential hike in the current cycle. This is reflected by the 2-Year US Treasury Yield trading below 3.9%, considerably lower than the current Federal Funds rate. JPMorgan now sees a rate cut in September as likely.
- The price of Bitcoin hit a 9-month high at $28,474 yesterday.
- Gold is looking bullish after reaching a new multi-month high earlier today but is currently struggling to get established above the big round number of $2000.
- In the Forex market, the Euro and Japanese Yen are looking strong today while the New Zealand Dollar looks weak, driven down partly by considerably worse than expected New Zealand GDP data last week, which showed the economy shrinking by 0.6% quarterly compared to the 0.2% decline which had been expected.
- The European Central Bank raised its Main Refinancing Rate by 0.50% to 3.50% last Thursday.
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