Archive for Financial News – Page 228

20 Mar

Week’s main events (March 20 – March 24)

By JustMarkets

This week will be full of important events. On Wednesday is the important monetary policy meeting of the Fed, where policymakers will announce their interest rate decision. Market pricing is leaning toward a quarter-point interest rate hike, which would raise borrowing costs to 5.00%. The Bank of England (BoE) and the Swiss National Bank (SNB) will hold their meetings on Thursday. Also, inflation data from the UK, Canada, and Japan will be released during the week. The volatile week will finish with data on business activity in different countries’ manufacturing and service sectors.

Monday, March 20
The People’s Bank of China (PBoC) will update the interest rate on Monday. No surprises are expected, but volatility in Asian markets may rise. Traders may also be interested in the Eurozone and New Zealand trade balance data.
Main events of the day:
  • – China PBoC Loan Prime Rate at 03:15 (GMT+2);
  • – German Producer Price Index (m/m) at 09:00 (GMT+2);
  • – Eurozone Trade Balance (m/m) at 12:00 (GMT+2);
  • – New Zealand Trade Balance (q/q) at 23:45 (GMT+2).
Tuesday, March 21
The main event on Tuesday will be the inflation data in Canada. Inflationary pressures are expected to be lower, but volatility with the Canadian dollar will increase. Traders should also not miss the RBA’s monetary policy minutes, which will show how RBA policymakers voted at the last meeting. It’s a bank holiday in Japan.
Main events of the day:
  • – Australia RBA Meeting Minutes at 02:30 (GMT+2);
  • – German ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
  • – Eurozone ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
  • – Canada Consumer Price Index (m/m) at 14:30 (GMT+2);
  • – Eurozone ECB President Lagarde Speaks at 14:30 (GMT+2);
  • – US Existing Home Sales (m/m) at 16:00 (GMT+2).
Wednesday, March 22
On Wednesday, the Fed will hold a meeting on monetary policy and interest rates. This is a crucial meeting that will show how policymakers will respond to banking sector problems. Analysts are expecting a 0.25% rate hike, but there is a 30% chance that the Fed may press pause in QT. Volatility with USD currency pairs will increase sharply. It should also be noted that the UK will publish inflation data in the morning, which will influence the Bank of England’s interest rate decision on Thursday. A decline in consumer prices is projected.
Main events of the day:
  • – UK Consumer Price Index (m/m) at 09:00 (GMT+2);
  • – UK Producer Price Index (m/m) at 09:00 (GMT+2);
  • – Eurozone ECB President Lagarde Speaks at 10:45 (GMT+2);
  • – US Crude Oil Reserves (w/w) at 16:30 (GMT+2);
  • – US FOMC Economic Projections at 20:00 (GMT+2);
  • – US Fed Interest Rate Decision at 20:00 (GMT+2);
  • – US FOMC Statement at 20:00 (GMT+2);
  • – US FOMC Press Conference at 20:30 (GMT+2).
Thursday, March 23
Thursday will also be a volatile day. The Asian session will release important inflation data in Singapore and Hong Kong. Next, the SNB will hold a monetary policy meeting where it is expected to raise the interest rate by 0.5%, which is highly unusual for the SNB. Then the Bank of England will hold its meeting. The BoE is expected to raise rates by 0.25% if inflation data does not disappoint on Tuesday.
Main events of the day:
  • – Hong Kong Interest Rate Decision at 04:30 (GMT+2);
  • – Singapore Consumer Price Index (m/m) at 07:00 (GMT+2);
  • – Hong Kong Consumer Price Index at 10:30 (GMT+2);
  • – Switzerland SNB Interest Rate Decision at 10:30 (GMT+2);
  • – Switzerland SNB Monetary Policy Assessment at 10:30 (GMT+2);
  • – Switzerland SNB Press Conference at 11:00 (GMT+2);
  • – UK BoE Interest Rate Decision at 14:00 (GMT+2);
  • – UK BoE MPC Meeting Minutes at 14:00 (GMT+2);
  • – US Initial Jobless Claims (w/w) at 14:30 (GMT+2);
  • – US New Home Sales (m/m) at 16:00 (GMT+2);
  • – US Natural Gas Storage (w/w) at 16:30 (GMT+2).
Friday, March 24
Friday will bring various Manufacturing PMI and Services PMI statistics for many countries. This data shows how the economy works in times of high-interest rates. Rising rates are a sign of a resilient economy. In Japan, consumer price data will be released. Analysts expect inflation to decline, but there may be surprises, so traders should be focused.
Main events of the day:
  • – Australia Manufacturing PMI (m/m) at 00:00 (GMT+2);
  • – Australia Services PMI (m/m) at 00:00 (GMT+2);
  • – Japan National Core CPI (m/m) at 01:30 (GMT+2);
  • – Japan Manufacturing PMI (m/m) at 02:30 (GMT+2);
  • – Japan Services PMI (m/m) at 02:30 (GMT+2);
  • – UK Retail Sales (m/m) at 09:00 (GMT+2);
  • – German Manufacturing PMI (m/m) at 10:30 (GMT+2);
  • – German Services PMI (m/m) at 10:30 (GMT+2);
  • – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+2);
  • – Eurozone Services PMI (m/m) at 11:00 (GMT+2);
  • – UK Manufacturing PMI (m/m) at 11:30 (GMT+2);
  • – UK Services PMI (m/m) at 11:30 (GMT+2);
  • – US Durable Goods Orders (m/m) at 14:30 (GMT+2);
  • – Canada Retail Sales (m/m) at 14:30 (GMT+2);
  • – US Manufacturing PMI (m/m) at 15:45 (GMT+2);
  • – US Services PMI (m/m) at 15:45 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
17 Mar

The ECB raised the interest rate by 0.5%. The US Launches BTFP Program for Banks

By JustMarkets

The US indices rose Thursday after reports that major Wall Street banks pledged billions of dollars to bail out First Republic Bank. JPMorgan Chase & Co (JPM), Bank of America Corp (BAC), and Wells Fargo & Company (WFC) led a group of major banks that will rescue First Republic Bank (FRC) deposits totaling $30 billion. As the stock market closed on Thursday, the Dow Jones Index (US30) increased by 1.17%, and the S&P 500 Index (US500) added 1.76%. NASDAQ Technology Index (US100) gained 2.48% yesterday.

The new Bank Term Funding Program (BTFP) is very popular among banks. The US banks took $303 billion in “cash” from the Fed over the week. Many analysts believe the new BTFP instrument is a hidden quantitative easing (QE) program. In general, if you evaluate the situation in a comprehensive way: bankruptcies of banks in the USA, the problem of Switzerland’s largest bank, and liquidity problems in a number of market segments (government debt). All these are direct consequences of the aggressive increase of rates in response to inflation, which was a consequence of previous unbridled monetary and fiscal policy. The Fed simply has no choice but to shift policy tightening toward easing. The US Federal Reserve’s monetary policy meeting next week will show the FOMC’s reaction.

The Federal Reserve’s cornerstone method for determining whether US banks can survive an economic crisis has had a huge misstep over the years: regulators have not tested a scenario resembling the 2023 economy and current financial conditions. Fed officials promoted annual stress tests as the primary supervisory method for assessing the health and soundness of the nation’s largest banks. According to regulatory experts, a more realistic stress-testing scenario would not have solved the institutional problems that led to SVB’s decline. But the lack of modeling of an interest rate hike does point to a hole in the way Fed officials think about financial risk.

European stocks rose yesterday. Germany’s DAX (DE30) gained 1.57%, France’s CAC 40 (FR40) jumped by 2.03%, Spain’s IBEX 35 index (ES35) added 1.50%, Britain’s FTSE 100 (UK100) closed up by 0.89%.

The ECB raised its rate by 50bp to 3.5% and will start cutting its bonds portfolio by 15bn euros a month. Further monetary policy will be determined by new data on inflation as well as the banking sector. The ECB’s latest set of forecasts, released Thursday, shows that inflation is still slightly above the bank’s medium-term target of 2% in 2025. At the same time, it raised growth forecasts for the single currency bloc and now sees GDP growth of 1% this year.

A rapid drop in US Treasury bond yields has driven the rise in precious metals in recent days. Yields are now near their lowest level since September 2022 amid a dovish revision to the Fed’s monetary policy outlook. Gold is considered a safe haven asset, so it performs well in times of heightened uncertainty, high volatility, and financial stress. Therefore, it is not surprising that it has rallied strongly over the past few trading sessions. If the US Federal Reserve announces its latest rate hike next week, gold and silver prices could get additional support, especially if bank problems worsen.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.80%, China’s FTSE China A50 (CHA50) fell by 0.60%, Hong Kong’s Hang Seng (HK50) ended the day down by 1.72%, India’s NIFTY 50 (IND50) added 0.08%, and Australia’s S&P/ASX 200 (AU200) ended the day up by 0.40%.

New Zealand’s GDP fell by 0.6% in the last quarter. For the RBNZ, this is a clear signal that it is time to cut down the tightening program, as the economy has shrunk faster than the central bank forecasts. If the second quarter of 2023 also sees a decline, it would mean that New Zealand is in about a six-month recession. According to Stats NZ, the decline in manufacturing activity was the biggest contributor to the decline, with the sector down by 1.9%. Overall, 9 of the 16 industries tracked by Stats NZ fell, especially in retail, housing, arts, leisure, and transportation.

S&P 500 (F) (US500) 3,960.28 +68.35 (+1.76%)

Dow Jones (US30)32,246.55 +371.98 (+1.17%)

DAX (DE40) 14,967.10 +231.84 (+1.57%)

FTSE 100 (UK100) 7,410.03 +65.58 (+0.89%)

USD Index 104.44 -0.20 (-0.19%)

Important events for today:
  • – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+2);
  • – US Industrial Production (m/m) at 15:15 (GMT+2);
  • – US Michigan Consumer Sentiment (m/m) at 16:00 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
17 Mar

Week Ahead: More big swings for USDCHF?

By ForexTime

The Swiss Franc has been the most volatile G10 currency against the US dollar this week.

The turmoil from recent days surrounding Silicon Valley Bank and Credit Suisse has roiled USDCHF, while altering the market’s expectations for key central bank meetings due in the coming week.

And there could be more volatility in store for this FX pair, in a week that features these economic data releases and events:

Monday, March 20

  • CNH: China loan prime rates
  • EUR: ECB President Christine Lagarde speech

Tuesday, March 21

  • AUD: RBA meeting minutes release
  • EUR: Germany March ZEW survey expectations
  • CAD: Canada February consumer price index (CPI)
  • Nike earnings

Wednesday, March 22

  • NZD: New Zealand 1Q consumer confidence
  • GBP: UK February CPI
  • USD: Fed rate decision

Thursday, March 23

  • CHF: Swiss National Bank rate decision
  • NOK: Norges Bank rate decision
  • GBP: Bank of England rate decision
  • USD: US weekly jobless claims

Friday, March 24

  • JPY: Japan February CPI
  • EUR: Eurozone January manufacturing and services PMIs
  • GBP: UK February retail sales; March PMIs, consumer confidence

 

 

Typically, in a week like the upcoming one, we’d be focusing on the US Federal Reserve (Fed) and the Bank of England (BOE), being the central banks of larger economies compared to the Swiss National Bank (SNB).

However, given the recent Credit Suisse crisis, the SNB has muscled its way into the spotlight, along with its currency, the Swiss Franc (CHF).

 

Here are 3 reasons to watch how USDCHF fares next week:

1) Swiss National Bank’s take on Credit Suisse crisis

The SNB carries out its monetary policy assessment just 4 times per year, half the number of policy meetings that the Fed has scheduled for 2023.

For the upcoming SNB meeting, markets had expected another hike of 50-basis points (bps), following the central bank’s hikes last year totalling 175bps.

Yet, the Credit Suisse saga that’s unfolding in the SNB’s own backyard, noting the irony of Switzerland’s long-held stature as a banking haven, adds a dramatic dimension to the press conference by SNB President Thomas Jordan next week.

And the Swiss Franc (CHF) may react less to the actual adjustment to the policy rate, but rather any commentary that President Jordan may offer surrounding the Credit Suisse crisis.

Note how CHF weakened against every single one of its G10 peers as the CS drama played out across global financial markets this week:

The stakes are high for the SNB.

After all, CS is Switzerland’s second biggest lender, with the bank’s assets equal to about 70% of the country’s GDP!

Furthermore, the Bank of International Settlements has listed Credit Suisse as one of the top-30 banks most important to the global financial system.

 

Credit Suisse’s importance prompted the SNB to step in and extend a US$ 54 billion (CHF 50 billion) credit line to the embattled bank to help shore up liquidity.

Also, following the central bank’s previous policy meeting in December 2022, the SNB President had deviated from the norm of not commenting on individual commercial banks and publicly supported Credit Suisse’s ongoing 3-year transformation to its business.

Having already extended verbal, written, and liquidity support, should the SNB even hint that it has to step in with further aid for CS, that may actually have the unintended effect of weakening the Swiss Franc on the notion that Credit Suisse’s turmoil is not yet over.

2) Fed’s dilemma between inflation and financial stability

Last week, markets had assigned a 70% chance that the Fed would trigger a 50-bps hike at its March meeting.

That would reassert its aggressiveness in its fight against inflation after having downshifted to a relatively smaller 25-bps hike at its previous policy meeting held on January 31 – February 1st, 2023.

But that calculus has been altered dramatically, as the collapse of Silicon Valley Bank continues reverberating across the US banking sector.

With the Fed having to shore up financial stability in its own backyard, markets believe policymakers cannot follow through with yet another larger rate hike, which are intended to incur further damage to the economy so as to subdue US inflation that’s still stubbornly elevated.

Hence, at the time of writing, markets have whittled down their forecasts to an 81% chance of a 25-bps hike by the Fed next week.

Similar to the SNB (and the ECB’s press conference this week), concerns surrounding financial stability risks are set to dominate Fed Chair Powell’s session with the media after the FOMC meeting concludes.

Should markets even get a whiff that Chair Powell and his colleagues are growing more concerned about potential contagion risks and are refusing the shut the door on winding down, or perhaps even an abrupt pause, to the Fed’s rate-hike cycle, such policy clues may weaken the US dollar and drag USDCHF lower.

3) USDCHF’s one-week implied volatility surges to fresh year-to-date high

All of the above is clearly not lost on markets, prompting a surge in the expected volatility for USDCHF over the next one-week period.

 

With the banking woes of late leaving policymakers, both the Fed and the SNB, between a rock and a hard place:

  • Do these central bankers keep focusing on their ongoing battle against inflation and persist with a 50-bps hike, risking further damage to its financial sector that’s still raw and vulnerable?
  • Or do the likes of the SNB and the Fed opt for a relatively smaller 25-bps hike to preserve the still-fragile sentiment surrounding banks, but risk letting inflation rage further?

 

With so much at stake, markets are ready to react to the slightest clues.

The central bank that shows the greater concern for its own banking sector, should see its currency weaken further.

  • Should fears surrounding Credit Suisse spike anew over the coming week, that could even launch USDCHF above its 100-day simple moving average.
  • On the other hand, if yet another US bank is added to this infamous list which already features the likes of Silicon Valley Bank, Signature Bank, and First Republic, fresh alarms surrounding the US banking sector may drag USDCHF back into sub-0.920 domain.

 

Key levels for USDCHF

RESISTANCE

  • 0.93393: previous cycle high
  • 100-day SMA
  • 0.9440 region: early-March peaks

 

SUPPORT

  • 50-day SMA
  • 0.920 psychologically-important region
  • 0.905 – 0.907: year-to-date lows

 

 

From current levels, Bloomberg’s FX model points to a 73% chance that USDCHF will trade within the 0.9088 to 0.9420 range over the next week.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Financial News Forex and Currency News
17 Mar

The Shocking Truth About the FDIC and Your Bank Deposits

Why you can’t rely on the FDIC if your bank goes under

By Elliott Wave International

Editor’s note: The failures of Silicon Valley Bank and Silvergate Bank have many observers of the banking system discussing the possibility of contagion. Even so, many depositors feel safe because their deposits are covered up to $250,000 by the F.D.I.C. (Federal Deposit Insurance Corporation). However, this feeling of safety may very well be misplaced.

Here are some important insights about the F.D.I.C. and the safety of your bank deposits.

Millions of U.S. bank depositors feel safe in the knowledge that the Federal Deposit Insurance Corporation will protect their accounts, even if their bank goes under.

Yes, it’s true that the FDIC says it will do so. As their website states:

The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.

But, the question is: Does the FDIC have the wherewithal to fulfill its promise?

In the event of a major financial crisis, the answer is an emphatic “no.” Not even close.

Here’s what the Elliott Wave Theorist said in August 2008, near the middle of the 2007-2009 financial crisis:

The FDIC is not funded well enough to bail out even a handful of the biggest banks in America. It has enough money to pay depositors of about three big banks. After that, it’s broke.

No doubt, most bank depositors would be shocked to learn this.

But think about it: No single entity could possibly insure all of the nation’s bank deposits.

Yet, that FDIC sticker on the front of your bank is very reassuring. The discussions with your banker about your deposit “insurance” might be reassuring.

But, something that is not quite so reassuring is from none other than a former vice-chairman of the FDIC itself. Here’s what Thomas Hoenig wrote for the Los Angeles Times in a Dec. 18, 2014 article titled, “FDIC couldn’t cover a big bank bailout without taxpayer support”:

As a reminder, when the financial industry imploded in 2008, Congress had to pass a special law to fund a $700-billion bailout… . The Federal Deposit Insurance Corp. had nowhere near enough resources to fund their resolution.

Today, with assets of nearly $11 trillion and derivatives worth $4 trillion, the eight largest U.S. banks are far bigger and hold more derivatives than in 2008. Compare those numbers with the FDIC insurance fund of $54 billion. [Emphasis added]

These are eye-opening statistics.

The best way to protect your deposits is to adequately research the banks in your community, and pick one where the banks’ officers handle their customers’ deposits prudently.

Indeed, the Theorist once remarked:

Relatively safe banks may become even safer. If they have the sense to inform the public of their relative safety aspect, depositors in a developing financial crisis will move funds out of weak banks into stronger ones, making the weak ones weaker and the relatively strong ones stronger.

But, as you’ve seen, it’s a myth that the FDIC can always protect your bank deposits, and it’s not the only myth. We have more.

You can see them in EWI’s classic report, “Market Myths Exposed.” It’s part of your free 21-day Elliott wave journey across U.S. markets — FreePass for a Changed World.

You’ll discover the 10 most nefarious myths and how they undermine your financial safety. Myths like:

  • News and Events Drive the Markets
  • Earnings Drive Stock Prices
  • To Do Well Investing, You Have to Diversify
  • And 7 more

Don’t delay. Join FreePass for a Changed World and read the FREE “Market Myths Exposed” report instantly.

This article was syndicated by Elliott Wave International and was originally published under the headline The Shocking Truth About the FDIC and Your Bank Deposits. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Economics & Fundamentals Financial News
16 Mar

Defense Products Firm To Be Cash Flow Positive This Year

Source: Darren Odell  (3/15/23)

This Australian company, which is experiencing sales momentum and attracting defense contractors’ attention, also is a takeout target, noted a Peloton Capital report.

DroneShield Ltd. (DRO:ASX; DRSHF:OTC) will be operating cash flow positive by year-end and “is an acquisition target,” purported Peloton Capital analyst Darren Odell in a March 9 research note.

With respect to achieving this cash goal, the Australian counterdrone products and solutions company has the following many factors working in its favor, Odell wrote.

1) DroneShield recently raised AU$29.4 million (AU$29.4M) through its stock purchase plan resulting from the AU$10.9M placement last month.

“The recent capital raise has provided DroneShield the ability to build inventory in anticipation of material contracts (and fulfill smaller contracts faster) that are expected to close, in the short to medium term,” wrote Odell.

2) DroneShield recently landed two contracts totaling AU$22M.

3) The company has a robust AU$200M sales pipeline consisting of multiple contracts, each worth more than AU$10. Peloton Capital expects DroneShield to close three large and several smaller deals this year.

“Our DroneShield valuation to AU$0.84 is based on increased confidence on the closure of larger contracts in 2023 and beyond,” wrote Odell.

Compared to Peloton’s AU$0.84 target price, DroneShield’s current share price is about AU$0.335. The company is a Buy.

4) Existing contracted customers in the Five Eyes countries will likely buy more products from DroneShield.

5) The U.S. Department of Defense recommends DroneShield.

6) The Russia-Ukraine war has heightened interest in products like those sold by DroneShield.

Attractive to Potential Buyers

With respect to DroneShield likely being acquired, Odell indicated the following factors support the belief it will happen.

1) One of DroneShield’s shareholders, owning about a 5% interest, is Epirus, a California-based unmanned aerial vehicle firm.

2) Private equity backs DroneShield.

3) The U.S. government recommends DroneShield.

4) Global defense contractors have taken note of DroneShield and its recent contracts.

 

Disclosures:
1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with: DroneShield Ltd. Please click here for more information. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

3) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

4) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of DroneShield Ltd., a company mentioned in this article.

Disclosures For Peloton Capital, DroneShield Ltd., March 9, 2023

This report is provided by Peloton Capital Pty Ltd (Peloton) (ABN 22 149 540 018, AFSL 406040) and is general in nature. It is intended solely for the use of wholesale clients, within the meaning of the Australian Corporations Act 2001. This report must not be copied or reproduced, or distributed to any person, unless otherwise expressly agreed by Peloton. This document contains only general securities information or general financial product advice. The information contained in this report has been obtained from sources that were accurate at the time of issue, including the company’s ASX releases which have been relied upon for factual accuracy. The information has not been independently verified. Peloton does not warrant the accuracy or reliability of the information in this report. The report is current as of the date it has been published.

In preparing the report, Peloton did not take into account the specific investment objectives, financial situation or particular needs of any specific recipient. The report is published only for informational purposes and is not intended to be personal financial product advice. This report is not a solicitation or an offer to buy or sell any financial product. Peloton is not aware whether a recipient intends to rely on this report and is not aware of how it will be used by the recipient. Before acting on this general financial product advice, you should consider the appropriateness of the advice having regard to your personal situation, investment objectives or needs. Recipients should not regard the report as a substitute for the exercise of their own judgment.

Peloton may assign ratings as ‘speculative buy’, ‘buy’ and ‘sell’ to securities from time to time. Securities not assigned are deemed to be ‘neutral’. Being assigned a ‘speculative buy’, ‘buy’ or ‘sell’ is determined by a security total return potential, with the total return potential being aligned to the upside or downside differential between the current share price and the targeted price within a specified time horizon, if deemed appropriate. The views expressed in this report are those of the analyst/author named on the cover page. No part of the compensation of the analyst is directly related to inclusion of specific recommendations or views in this report. The analyst/author receives compensation partly based on Peloton revenues as well as performance measures such as accuracy and efficacy of both recommendations and research reports.

Peloton believes that the information contained in this document is correct and that any estimates, opinions, conclusions or recommendations are reasonably held or made at the time of its compilation in an honest and fair manner that is not compromised. However, no representation is made as to the accuracy, completeness or reliability of any estimates, opinions, conclusions or recommendations (which may change without notice) or other information contained in this report. To the maximum extent permitted by law, Peloton disclaims all liability and responsibility for any direct or indirect loss that may be suffered by any recipient through relying on anything contained in or omitted from this report. Peloton is under no obligation to update or keep current the information contained in this report and has no obligation to tell you when opinions or information in this report change.

Peloton does and seeks to do business with companies covered in research. As a result, investors should be aware that the firm may have a conflict of interest which it seeks to manage and disclose. Peloton and its directors, officers and employees or clients may have or had interests in the financial products referred to in this report and may make purchases or sales in those the financial products as principal or agent at any time and may affect transactions which may not be consistent with the opinions, conclusions or recommendations set out in this report. Peloton and its Associates may earn brokerage, fees or other benefits from financial products referred to in this report. Furthermore, Peloton may have or have had a relationship with or may provide or has provided, capital markets and/or other financial services to the relevant issuer or holder of those financial products.

Specific Disclosure: Peloton Capital raised $40.3m for DroneShield (DRO), announced March 2023, for which it earned fees.

Specific Disclosure: The analyst does hold securities in DRO.

Specific Disclosure: The report has been reviewed by DRO for factual accuracy.

Specific Disclosure: As at 9th March, Peloton Capital held c.1m DRO shares and 15m call options. This position may change at any time and without notice, including on the day that this report has been released. Peloton and its employees may from time-to-time own shares in DRO and trade them in ways different from those discussed in research. Peloton Capital may arrange the buying and selling securities on behalf of clients.

Financial News Stock Market News
16 Mar

Murrey Math Lines 16.03.2023 (USDCHF, XAUUSD)

By RoboForex.com

USDCHF, “US Dollar vs Swiss Franc”

On H4, USDCHF pair has broken through the 200-day Moving Average and is now above it, which indicates a possible bullish trend. The RSI is approaching the overbought area. In this situation we should expect the price to test 5/8 (0.9338) and its further breakdown and increase to resistance level of 6/8 (0.9399). A break-down of the support at 4/8 (0.9277) will cancel this scenario. In this case the pair may fall to the 3/8 (0.9216).

USDCHF_H4
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

On M15, the upper line of the VoltyChannel indicator has been broken. This event increases the probability of further price growth.

USDCHF_M15
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

XAUUSD, “Gold vs US Dollar”

On H4, level 8/8 (1937.50) and broke away from it, which indicates a possible corrective decline in the price. Convergence is observed on the RSI, which is also a signal of drop in the price. As a result, the price is likely to break down the level of 6/8 (1906.25) and then fall to the support level 4/8 (1875.00). Overcoming resistance at 7/8 (1921.88) can cancel this scenario. If that happens, the price of gold might return to the 8/8 (1937.50).

XAUUSD_H4
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

On M15, a break-down of the bottom line of the VoltyChannel indicator will be an additional signal for the downside movement of the price.

XAUUSD_M15

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Financial News Forex and Currency News
16 Mar

European indices collapsed because of the problems with Credit Suisse. Oil falls amid intensifying banking crisis

By JustMarkets 

The released US producer price index data came in better than expected. Factory inflation decreased by 0.1% last month. Markets reacted with a drop in US Treasury bond yields. This indicates an impending change in the Fed’s rhetoric and the imminent end of the rate hike cycle. Federal funds futures show a 40% probability that the rate will remain unchanged at the March 22 meeting and a 60% probability that 25 bps will raise the rate to the 5.00% level. At the same time, it is expected that the maximum rates will be formed already at the next meeting, and by the end of 2023, the Fed will cut the rate to 3.75%. At the close of the stock market on Tuesday, the Dow Jones Index (US30) was down by 0.87%, and the S&P 500 Index (US500) fell by 0.70%. The NASDAQ Technology Index (US100) gained 0.05% yesterday.

Concerns about the deepening banking crisis persist. Shares of the struggling Swiss bank Credit Suisse fell to a new historic low. Credit Suisse’s biggest sponsor, the National Bank of Saudi Arabia, said it would not provide further financial assistance to the bank. The bank’s shares fell more than 26%. After European markets closed, Swiss regulators said that Credit Suisse was now meeting capital and liquidity requirements and that the Swiss National Bank would provide additional liquidity if needed. It became known today that Credit Suisse will exercise an option to borrow up to 50 billion Swiss francs ($53.68 billion) from the Swiss National Bank under two lines of credit to strengthen liquidity conditions. This situation has led to renewed sell-offs among European banks: French Societe Generale, Spanish Banco de Sabadell, and German Commerzbank fell sharply yesterday, pulling European indices into the abyss. German DAX (DE30) shed by 3.27%, French CAC 40 (FR40) fell by 3.58%, Spanish IBEX 35 (ES35) lost 4.37%, British FTSE 100 (UK100) closed yesterday down by 3.83%.

The consumer price index in France rose from 6.0% to 6.3% in annual terms. Inflationary pressures in Europe remain resilient and figures from Germany, Spain, and France clearly show it. Reuters reported yesterday that the European Central Bank intends to stick to its plans to raise its key rate by 50 basis points at its meeting today. ECB head Christine Lagarde’s remarks on the European central bank’s future plans are also worth a closer look. The Office for Budget Responsibility (OBR) forecast, taking into account the new UK budget, argues that the country will not enter a technical recession as originally thought. Instead, the UK economy is expected to contract by a modest 0.2%. The government has also pledged to halve inflation, and further OBR projections suggest that inflation will fall to 2.9% by the end of 2023.

Gold strengthened its position at $1900 on Wednesday, hitting a new six-week high. The banking crisis is forcing investors to hide money in precious metals. The technical on spot gold suggests it could go much higher. The fundamental picture now is also in favor of further growth in gold and silver.

Crude oil prices are down for the third straight day. The US WTI crude oil has fallen below $70 a barrel. The collapse of SVB, the problems of Credit Suisse, and the general financial instability contribute to the decline in quotes. While US authorities tried to ease fears of a broader contagion in the banking sector, the financial turmoil at Swiss bank Credit Suisse posed an additional threat to the global economy. At the same time, the IEA (International Energy Agency) reported an increase in oil inventories, pushing oil supply to an 18-month-high.

Asian markets were mostly up yesterday. Japan’s Nikkei 225 (JP225) gained 0.03%, China’s FTSE China A50 (CHA50) added 0.02%, Hong Kong’s Hang Seng (HK50) jumped by 1.52%, India’s NIFTY 50 (IND50) declined by 0.42% and Australia’s S&P/ASX 200 (AU200) was positive 0.86% by Wednesday.

Bank of Japan (BOJ) Governor Haruhiko Kuroda, who is retiring in April, said his ten-year monetary experiment, during which $3.7 trillion was injected into the economy, was “half successful.” In addition to lowering borrowing costs, Kuroda’s policies sought to sway public opinion and lead the public out of deflation with a powerful kick of monetary stimulus. Kuroda left a mixed legacy for the Bank of Japan: his massive stimulus was praised for pulling the economy out of deflation, but it reduced bank profits and distorted market functions through prolonged low rates. In 2016, Kuroda added a cap on long-term rates as part of a policy called yield curve control (YCC), which is still in effect. Many analysts expect the Bank of Japan to begin dismantling Kuroda’s stimulus policy under a new governor, Kazuo Ueda.

In Australia, the latest labor market data showed that the economy added 64,600 jobs last month, with the unemployment rate falling to a record 3.5%. The stronger-than-expected employment figures for February reinforced fears of further interest rate hikes by the Reserve Bank of Australia (RBA).

S&P 500 (F) (US500) 3,891.93 −27.36 (−0.70%)

Dow Jones (US30)31,874.57 −280.83 (−0.87%)

DAX (DE40) 14,735.26 −497.57 (−3.27%)

FTSE 100 (UK100) 7,344.45 −292.66 (−3.83%)

USD Index 104.74 +1.14 (+1.10%)

Important events for today:
  • – Japan Trade Balance (m/m) at 01:50 (GMT+2);
  • – Australia Unemployment Rate (m/m) at 02:30 (GMT+2);
  • – Italian Consumer Price Index (m/m) at 11:00 (GMT+2);
  • – US Building Permits (m/m) at 14:30 (GMT+2);
  • – US Initial Jobless Claims (w/w) at 14:30 (GMT+2);
  • – US Philadelphia Fed Manufacturing Index (m/m) at 14:30 (GMT+2);
  • – Eurozone ECB Interest Rate Decision at 15:15 (GMT+2);
  • – Eurozone ECB Monetary Policy Statement at 15:15 (GMT+2);
  • – Eurozone ECB Press Conference at 15:45 (GMT+2);
  • – US Natural Gas Storage (w/w) at 16:30 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
16 Mar

STOX50 Wobbles As Markets Eye ECB Amid Credit Suisse Drama

By ForexTime 

European shares traded mixed on Thursday as investors remained guarded towards the chaos revolving around Credit Suisse Group AG ahead of the European Central Bank (ECB) meeting.

Despite Credit Suisse receiving a US $54 billion lifeline from the Swiss National Bank, Switzerland’s central bank, some caution still lingered in the air.  The STOX50 Index which represents the 50 largest companies from 11 Eurozone countries struggled for direction this morning amid the lingering unease. However, the banking sector flashed green with Credit Suisse shares rallying over 20% following the emergency loan. With the ECB meeting just a few hours away and investors digesting the series of events concerning Credit Suisse, markets may switch into standby mode until another fundamental spark is brought into the picture.

Taking a brief look at the technical picture, the STOX50 is under pressure on the daily charts. The recent breakdown and daily close below the 4100 support level may open the door to further downside.

It’s all about the ECB meeting…

The European Central Bank is set to announce its rate decision this afternoon at 13:15 GMT.

According to a survey of economists by Bloomberg, most expect a 50-basis point hike. However, when factoring the negative developments concerning Credit Suisse – expectations may differ from reality.

The red flags appeared last week (March 9th) after Credit Suisse was forced to delay the publishing of its annual report thanks to a last-minute query from the US Securities and Exchange Commission. Yesterday (March 15th) the alarm bells rang after Ammar Al Khudairy, the chairman of Credit Suisse’s largest shareholder, Saudi National Bank, said that he would “absolutely not” make further investments in Credit Suisse. These comments sent shockwaves across financial markets and compounded recent fears following Silicon Valley Bank’s failure.

A battle between ECB hawks and doves

There is no doubt that the Credit Suisse drama will add more flavor to the pending ECB meeting.

Growing fears around the overall health of the financial system following the latest developments could empower ECB doves. This may result in the ECB opting for a smaller-than-expected rate hike to prevent further damaging the financial system. On the other hand, inflation still remains hot with core inflation hitting a record high of 5.6% year-on-year in January. This could serve as a strong enough argument for ECB hawks  – resulting in a 50-bp hike. Whatever the outcome, it will be a challenging meeting for the ECB and will certainly set the tone for the euro this month.

How does this impact the STOX50 Index?

Now, this is where things get interesting.

Given today’s environment, a larger-than-expected rate hike may fuel recession risks for the Eurozone while further damaging confidence about the health of the financial system. This would be bad news for European stock markets as the risk aversion, empowers equity bears – sending the STOX50 lower. It will be interesting to see whether the ECB mentions anything about the Credit Suisse situation.  If the central bank strikes a confident tone and suggests that the Credit Suisse situation is temporary, this could boost investor confidence – ultimately supporting the STOX50.

A deep dive into the technicals…

The STOX50 index on the D1 time frame was in a strong uptrend that made a last higher top at 4325.0 on 6 March. The bears then saw an opportunity and started coming into the market in more numbers.

After the top at 4325.0, the price broke through the 15 and 34 Simple Moving Averages (SMA) and the Momentum Oscillator changed course to the downside, both also confirming the increased bearish momentum in the market. A weekly support level was also breached and this became a new resistance level.

A possible critical support level formed when a lower bottom was recorded at 4070.6 on 13 March. Bulls tried to push the market up without success and the price formed a lower top on 14 March at 4190.4, touching the new weekly resistance level.

The very next day the bears broke through the critical support level at 4070.6 and three possible price targets were projected from there. Attaching the Fibonacci tool to the lower bottom at 4070.6, and dragging it to the lower top at 4190.4, the following targets were calculated. The first target can be estimated at 3996.6 (161.8%) which is located at the next weekly support level. The second price target may be calculated at 3876.8 (261.8%) and the price will have to break through yet another weekly support level to reach the third and final target which might be expected at 3682.9 (423.6%).

If the resistance level at 4190.4 is broken, the above scenario is canceled and must be re-assessed.

As long as the bears stay in control, the outlook for STOX50 on the D1 time frame will remain negative.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Financial News Stock Market News
15 Mar

Data Communications Co. To Buy Printing Firm

Source: Chris Thompson  (3/14/23)

The strategic merger between these two Canadian entities should enhance the acquirer’s “capabilities and growth potential,” noted an eResearch Corp. report. 

Data Communications Management Corp. (DCM:TSX; DCMDF:OTCQX) agreed to acquire the Canadian operations of R.R. Donnelley & Sons, called Moore Canada (RRD Canada), for CA$123 million (CA$123M), which should provide beneficial synergies, reported eResearch Corp. analyst Chris Thompson in a March 10 research note. The transaction should close in Q2/23.

“We believe the deal will be accretive to Data Communications Management’s financial profile as it accelerates [the company’s] revenue and EBITDA growth and diversifies its revenue base,” Thompson wrote. “It could help accelerate sales growth, lower some organizational costs, and enhance operational efficiency, which could lead to an improved overall financial performance.”

In other news, the analyst reported Data Communications reported strong preliminary full-year 2022 (FY22) financial results, noteworthy for higher-than-expected revenue as well as year-over-year (YOY) increases in revenue, gross profits, and EBITDA.

Boosts to Target Price

Thompson highlighted that the merger and strong FY22 are “positive for the company valuation, according to our model.” Incorporating last year’s revenue increases eResearch’s target price on Data Communications to CA$4.59 per share, whereas accounting only for the acquisition takes it to CA$5.92 per share. Combining both raises it to CA$6.02 per share.

Data Communications is rated Buy.

The private equity investment firm, however, plans to keep its target price as is, now CA$4.50 per share, until the merger closes or final FY22 financial results are released.

Compared to the current CA$4.50 per share target price, this provider of marketing and business communication solutions is currently trading at about CA$2.06 per share, noted Thompson. This price difference implies significant potential gains for investors. Data Communications is rated Buy.

Impacts of the Deal

Thompson highlighted the acquisition should boost Data Communications’ capabilities and growth potential given RRD Canada’s “highly complementary” operating model and the expectation RRD Canada will bring online more products, services, and technological abilities.

RRD Canada provides print and print-related services to thousands of Canadian customers through 10 locations and with 1,000 employees. Last year, RRD generated about CA$250M in revenue. With the merger, Data Communications will be able to offer RRD’s services and solutions to its existing customers and take advantage of cross-selling opportunities.

According to the terms of the share purchase agreement, Data Communications will acquire three RRD Canada-owned sites at an implied value of about CA$30M. After closing, Data Communications plans to pursue a sale and leaseback agreement for each of these locations.

The acquisition would take Data Communications’ 16 locations to 21 and its number of enterprise clients to 400-plus from 250. These additional clients would add scale, for instance, to Data Communications’ marketing workflow technology platform, DCMFlex, and its digital asset management platform, ASMBL.

Snapshot of 2022 Finances

For FY22, Data Communications reported preliminary revenue of between CA$270M and CA$274M. This is higher than eResearch’s estimate of $265.3M and reflects a 15–16.5% increase over FY21 revenue.

Similarly, gross profit last year was between 30.5% and 31%, up 20–21% from that in FY21. FY22 EBITDA was between CA$35.5M and CA$36.5M, a 41–45% YOY increase.

Total debt, net of cash, down dropped about 35% from 2021’s amount. Data Communications plans on paying for the acquisition of RRD entirely through committed credit facilities noted Thompson.

Data Communications is scheduled to release full financial FY22 results on March 21, 2023, and hold an investor call and webcast the next day.

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Disclosures:

1) Doresa Banning wrote this article for Streetwise Reports LLC as an independent contractor. They or members of their household own securities of the following companies mentioned in the article: None. They or members of their household are paid by the following companies mentioned in this article: None.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Data Communications Management Corp. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.

4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

Disclosures for eResearch, Data Communications Management Corp., March 10, 2023

ANALYST ACCREDITATION

eResearch Analyst on this Report: Chris Thompson CFA, MBA, P.Eng. Analyst Affirmation: I, Chris Thompson, hereby state that, at the time of issuance of this research report, I do not own common shares, share options, or share warrants of DATA Communications Management Corp. (TSX:DCM).

eRESEARCH DISCLOSURE STATEMENT

eResearch is engaged solely in the provision of equity research to the investment community. eResearch provides published research and analysis to its Subscribers on its website (www.eresearch.com), and to the general investing public through its extensive electronic distribution network and newswire agencies. eResearch makes all reasonable efforts to distribute research material simultaneously to all of its Subscribers. eResearch does not manage money or trade with the general public, provides full disclosure of all fee arrangements, and adheres to the strict application of its Best Practices Guidelines. eResearch accepts fees from the companies it researches (the “Covered Companies”), and from financial institutions or other third parties. The purpose of this policy is to defray the cost of researching small and medium-capitalization stocks which otherwise receive little or no research coverage.

DATA Communications Management Corp. paid eResearch a fee to have it conduct research and publish reports on the Company for one year.

To ensure complete independence and editorial control over its research, eResearch follows certain business practices and compliance procedures. For instance, fees from Covered Companies are due and payable before research starts. Management of the Covered Companies is sent copies, in draft form without a Recommendation or a Target Price, of the Initiating Report and the Update Report before publication to ensure our facts are correct, that we have not misrepresented anything, and have not included any non-public, confidential information. At no time is management entitled to comment on issues of judgment, including Analyst opinions, viewpoints, or recommendations. All research reports must be approved, before publication, by eResearch’s Director of Research, who is a Chartered Financial Analyst (CFA).

All Analysts are required to sign a contract with eResearch before engagement and agree to adhere at all times to the CFA Institute Code of Ethics and Standards of Professional Conduct. eResearch Analysts are compensated on a per-report, per-company basis and not based on his/her recommendations. Analysts are not allowed to accept any fees or other considerations from the companies they cover for eResearch. Officers, analysts, and directors of eResearch are allowed to trade in shares, warrants, convertible securities, or options of any of the Covered Companies only under strict, specified conditions, which restrict trading 30 days before and after a Research Report is published.

Financial News Stock Market News
15 Mar

Why SVB and Signature Bank failed so fast – and the US banking crisis isn’t over yet

By Vidhura S. Tennekoon, Indiana University 

Silicon Valley Bank and Signature Bank failed with enormous speed – so quickly that they could be textbook cases of classic bank runs, in which too many depositors withdraw their funds from a bank at the same time. The failures at SVB and Signature were two of the three biggest in U.S. banking history, following the collapse of Washington Mutual in 2008.

How could this happen when the banking industry has been sitting on record levels of excess reserves – or the amount of cash held beyond what regulators require?

While the most common type of risk faced by a commercial bank is a jump in loan defaults – known as credit risk – that’s not what is happening here. As an economist who has expertise in banking, I believe it boils down to two other big risks every lender faces: interest rate risk and liquidity risk.

Interest rate risk

A bank faces interest rate risk when the rates increase rapidly within a shorter period.

That’s exactly what has happened in the U.S. since March 2022. The Federal Reserve has been aggressively raising rates – 4.5 percentage points so far – in a bid to tame soaring inflation. As a result, the yield on debt has jumped at a commensurate rate.

The yield on one-year U.S. government Treasury notes hit a 17-year high of 5.25% in March 2023, up from less than 0.5% at the beginning of 2022. Yields on 30-year Treasurys have climbed almost 2 percentage points.

As yields on a security go up, its price goes down. And so such a rapid rise in rates in so short a time caused the market value of previously issued debt – whether corporate bonds or government Treasury bills – to plunge, especially for longer-dated debt.

For example, a 2 percentage point gain in a 30-year bond’s yield can cause its market value to plunge by around 32%.

SVB, as Silicon Valley Bank is known, had a massive share of its assets – 55% – invested in fixed-income securities, such as U.S. government bonds.

Of course, interest rate risk leading to a drop in market value of a security is not a huge problem as long as the owner can hold onto it until maturity, at which point it can collect its original face value without realizing any loss. The unrealized loss stays hidden on the bank’s balance sheet and disappears over time.

But if the owner has to sell the security before its maturity at a time when the market value is lower than face value, the unrealized loss becomes an actual loss.

That’s exactly what SVB had to do earlier this year as its customers, dealing with their own cash shortfalls, began withdrawing their deposits – while even higher interest rates were expected.

This bring us to liquidity risk.

Liquidity risk

Liquidity risk is the risk that a bank won’t be able to meet its obligations when they come due without incurring losses.

For example, if you spend US$150,000 of your savings to buy a house and down the road you need some or all of that money to deal with another emergency, you’re experiencing a consequence of liquidity risk. A large chunk of your money is now tied up in the house, which is not easily exchangeable for cash.

Customers of SVB were withdrawing their deposits beyond what it could pay using its cash reserves, and so to help meet its obligations the bank decided to sell $21 billion of its securities portfolio at a loss of $1.8 billion. The drain on equity capital led the lender to try to raise over $2 billion in new capital.

The call to raise equity sent shockwaves to SVB’s customers, who were losing confidence in the bank and rushed to withdraw cash. A bank run like this can cause even a healthy bank to go bankrupt in a matter days, especially now in the digital age.

In part this is because many of SVB’s customers had deposits well above the $250,000 insured by the Federal Deposit Insurance Corp. – and so they knew their money might not be safe if the bank were to fail. Roughly 88% of deposits at SVB were uninsured.

Signature faced a similar problem, as SVB’s collapse prompted many of its customers to withdraw their deposits out of a similar concern over liquidity risk. About 90% of its deposits were uninsured.

Systemic risk?

All banks face interest rate risk today on some of their holdings because of the Fed’s rate-hiking campaign.

This has resulted in $620 billion in unrealized losses on bank balance sheets as of December 2022.

But most banks are unlikely to have significant liquidity risk.

While SVB and Signature were complying with regulatory requirements, the composition of their assets was not in line with industry averages.

Signature had just over 5% of its assets in cash and SVB had 7%, compared with the industry average of 13%. In addition, SVB’s 55% of assets in fixed-income securities compares with the industry average of 24%.

The U.S. government’s decision to backstop all deposits of SVB and Signature regardless of their size should make it less likely that banks with less cash and more securities on their books will face a liquidity shortfall because of massive withdrawals driven by sudden panic.

However, with over $1 trillion of bank deposits currently uninsured, I believe that the banking crisis is far from over.The Conversation

About the Author:

Vidhura S. Tennekoon, Assistant Professor of Economics, Indiana University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

Economics & Fundamentals Financial News
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