Morning wrap (20.03.2023)

• Swiss National Bank announced that UBS will buy Credit Suisse in a government-arranged deal. UBS will purchase CS for 3 billion CHF and will get additional 9 billion CHF in government guarantees. Apart from that, 10 billion CHF in additional liquidity will also be provided

• Bank shares underperformed in early trading on Monday as UBS-CS deal includes writing down of AT1 bonds to zero. As those bonds have notional value of around 16 billion CHF, there concerns over exposure of other banks

• ECB President Lagarde hopes that the rescue deal will be enough to calm turmoil in European banking sector. Lagarde also said that ECB is ready to support European banks with loans should they require it

• Fed Chair Powell and US Treasury Secretary Yellen issued a joint statement stressing that US banking and financial systems are resilient

• Fed along with 5 other central banks (ECB, BoJ, BoE, SNB and BoC) announced actions to boost USD liquidity. Those 6 central banks will now hold daily auctions for USD through swap lines, instead of weekly auctions as it was before

• Bank of Japan said that there were no bids in a daily FX swap auction for USD today, in a sign that liquidity crunch is not as severe as feared

• US and European index futures launched new week's trade with small bullish price gaps. However, those gains were quickly erased and now both DAX and S&P 500 futures trade more or less flat compared Friday's cash closing prices

• Indices from Asia-Pacific traded lower today. Nikkei and S&P/ASX 200 dropped 1.4%, Kospi traded 0.6% lower, Nifty 50 plunged 1.2%

• Indices from China traded lower with Hang Seng (-3.4%) being top underperformer

• RBA Assistant Governor Kent said that Australian banks are resilient. Kent also said that RBA will take into account financial conditions while making next interest rate decision

• Goldman Sachs slashed its 1-year ahead Brent price forecast from $100 to $94 per barrel

• People's Bank of China left 1- and 5-year rates unchanged at 3.65 and 4.30%, respectively. Decision was in-line with market expectations

• Risk-off moods can be on cryptocurrency markets at the beginning of a new week - Bitcoin drops 2%, Ethereum trades 2.6% lower and Dogecoin dips 1.9%

• Energy commodities drop at the start of a new week - WTI drops over 2% and looks towards a test of the $65 per barrel area

• Precious metals trade mixed - gold gains 0.7%, silver adds 0.2% and platinum drops 0.6%

• CHF and JPY are the best performing major currencies while AUD and NZD lag the most

AUDJPY, a well-known risk barometer, is taking a hit at the beginning of new week's trade. The pair is attempting to make a break below a mid-term support zone ranging above 88.00. Note that similar attempts were made last week but all of them failed. Source: xStation5