March 15, 2023
Good morning,
Following yesterday’s market recovery from the near financial crisis in U.S. regional banks, we awake this morning to a new financial crisis unfolding in the European banking system. The culprit du jour: Credit Suisse (CS). The company’s shares dropped 25% upon disclosing that its top shareholder ruled out providing more assistance. A fresh risk of failure for Credit Suisse has rolled through financials globally. Euro Banks are off 6% broadly speaking, and U.S. money center banks are off 3-4% premarket. S&P Futures, unchanged for most of the night session, dropped -1.7% on CS news. Bonds, gold, and the dollar, are all rising in flights to safety fashion.
With the CS crisis getting all the attention this morning, today’s data release of PPI (Producer Price Index) and the Empire Survey slipped by without fanfare. On balance, the lower-than-expected PPI number allows the Fed to step back next week should market conditions warrant. Risk on emotions is raw, volatility is elevated, and next week’s Fed meeting seems a long way away.
Be well,
Mike