Yellen on banks, rate hikes aplenty, SEC hits crypto - what's moving markets

Published 23/03/2023, 11:50
© Reuters

By Geoffrey Smith -- European and Asian stocks follow the U.S. lower overnight after Treasury Secretary Janet Yellen reintroduces doubt into the debate over U.S. bank deposits, while the market comes to terms with the Federal Reserve's latest rate hike and downward revisions to its growth forecasts. Other central banks are following the Fed's lead, and U.S. regulators tighten the noose around the crypto sector. Here's what you need to know in financial markets on Thursday, March 23rd.

1. Yellen casts doubt on bank deposit coverage; jobless claims and current account due

Global stock markets followed the U.S. lower overnight, as investors zeroed in on the apparent contradiction between guidance from Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell on the outlook for the U.S. banking sector.

Yellen said in public comments that the U.S. isn’t planning “blanket insurance” for U.S. bank deposits, directly contradicting an unconfirmed report earlier in the week and implicitly acknowledging the limits of Fed action to stabilize smaller banks in the wake of this month’s collapses.

The Chicago and Kansas City Feds publish their monthly business surveys later, while current account data and weekly jobless claims are due at 08:30 ET (12:30 GMT). A more accurate reflection of longer-term trends in the labor market came on Wednesday in the form of recruitment firm Indeed cutting 15% of its staff, saying it’s just too big in view of the hiring slowdown it expects in the next couple of years.

2. Rate hikes aplenty after Fed move

A suite of interest rate hikes worldwide is following the Fed’s decision to raise the Fed Funds target range by 25 basis points on Wednesday.

The Swiss National Bank shrugged off the ructions of the weekend with a 50 basis point hike and a warning that more may be needed, brusquely adding that it considered any financial stability concerns arising from Credit Suisse's (SIX:CSGN) collapse as settled.

Norway also hiked by 25 basis points, and the Bank of England is expected to follow suit at 08:00 ET after hot inflation data for February.

In Asia, the Hong Kong Monetary Authority and the Philippines central bank both raised their key rates by the same amount. Turkey is set to be the only outlier, expected to keep its one-week repo rate at 8.5%.

3. Stocks set to recoup some of Wednesday's losses, Chinese Internet ADRs bounce as giant returns to growth

U.S. stocks are set to open mixed, with some taking solace from the fact that the Fed’s new projections foresee a lower interest rate path over the next two years than previously.

By 06:25 ET, Dow Jones futures were effectively flat, while S&P 500 futures were up 0.3%, and Nasdaq 100 futures were up 0.8%. The three main cash indices had lost around 1.6% each on Wednesday after Powell’s press conference.

Regional bank stocks are all modestly higher after big losses on Wednesday in response to Yellen’s comments. Chinese Internet stocks are also moving higher after conglomerate Tencent (HK:0700) reported a return to revenue growth in the last quarter, putting the government’s COVID and other regulatory measures behind it.

Elsewhere, TikTok founder Shou Zi Chew will testify in Congress in an attempt to forestall the closure of a service that has become a powerful competitor to Meta (NASDAQ:META), Alphabet (NASDAQ:GOOGL), and others in social media.

4. The SEC tightens its grip on crypto

Cryptocurrencies may be enjoying a moment in the sun as enthusiasts revel in the woes of the mainstream financial sector, but U.S. regulators continue to tighten the noose.

The Securities and Exchange Commission on Wednesday charged TRON founder Justin Sun and a handful of celebrity promoters with illegally distributing securities and with manipulating the market in them. Meanwhile, Coinbase (NASDAQ:COIN) said it expects the SEC to initiate an enforcement action against its staking programs, a month after rival Kraken shuttered its staking operation and paid $30 million to settle SEC charges.

Coinbase stock was down another 11% in premarket trade, but Bitcoin and other digital currencies were down by a more modest 1%-2%.

5. Oil supported by dollar weakness, even as stockpiles near 2-year high

Crude oil prices weakened overnight but held above the $70 a barrel threshold on support from the cheaper dollar, which improves the terms of trade for most big oil importers.

By 06:15 ET, U.S. crude futures were down 0.9% at $70.27 a barrel, while Brent crude was down 0.9% at $76.03 a barrel.

The market remains under pressure after a surprise increase in U.S. government-assessed stockpiles, which rose by over 1 million barrels to their highest in nearly two years last week. The Fed’s downward revision to U.S. growth forecasts for this year and next only underlined the shifting balance between demand and supply.  


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