Global banking stocks fell sharply after Silicon Valley Bank (SVB), a US bank that focuses on tech start-ups, collapsed. Confidence in SVB plummeted after it said it needed to undertake a $2.25bn capital raising as it had recorded losses of $1.8bn on its holdings of bonds. Bond yields fell sharply as fears over banks’ bond losses rose.

UK

The FTSE 100 lost 2.5% over the week.

UK GDP expanded 0.3% over January, partially bouncing back from a 0.5% contraction in December when strikes hampered output.

US

The S&P 500 dropped 3.1% over the week.

Non-farm payrolls rose 311,000 in February, above forecasts. However, wage growth slowed to 0.2% from January, while a separate survey reported a larger than forecast rise in the unemployment rate to 3.6%. The mixed report partly allayed fears the Federal Reserve would raise interest rates by 50 bps at its meeting later this month.

Fed chairman Jay Powell warned that “the ultimate level of interest rates is likely to be higher than previously anticipated” and that if economic data indicated “that faster tightening is warranted, we would be prepared to increase the pace of rate hikes”. However, he later emphasised that no decision had been made on interest rates ahead of the central bank’s meeting later this month.

The collapse of SVB particularly negatively impacted PacWest, Western Alliance and First Republic which are seen to have similar depositor profiles, along with Signature Bank which is known for its services to the cryptocurrency industry.

Europe

The Eurofirst 300 fell 2.2% over the week. The Stoxx Europe 600 Banks index ended the week on a weak note, hitting its lowest point for more than a month.

Eurozone fourth-quarter GDP growth was revised down to flat from an initial estimate of 0.1% due to cuts to estimates in Germany and Ireland.

Eurozone retail sales rose 0.3% over the month of January. While an improvement from December’s fall of 1.7%, it was below forecasts for a 1.3% rise.

The head of Italy’s central bank, one of the more dovish ECB members, criticised comments from fellow eurozone policymakers about how much higher interest rates will need to rise to tame inflation.

Japan

The Nikkei 225 rose 0.8% over the week.

Pacific Basin

The annual rate of increase in China’s consumer price index fell to a 12-month low of 1.0% in February from 2.1% in January. Prices of both food and non-food eased sharply.

China’s producer prices plunged 1.4% year on year in February, the steepest fall since November 2020.

Chinese imports declined 10.2% in the first two months of 2023 compared with the same period a year earlier. Meanwhile, exports declined 6.8%.

Emerging Markets

The MSCI EM Index slid 1.2% over the week in USD terms.

South Africa’s GDP shrank 1.3% over the fourth quarter of 2022 as blackouts hit growth.

Bonds

The yield on the 10-year US Treasury bond dropped 24 bps over the week to close at 3.75%, having traded above 4% mid-week. The yield inversion between two-year and 10-year Treasuries briefly surpassed 100 bps for the first time since September 1981.

The yield on the 10-year German Bund fell 21 bps over the week to close at 2.50%.

The yield on the 10-year UK Gilt fell 21 bps over the week to close at 3.78%.

Currencies

The Mexican peso hit a five-year high as the country’s relatively high interest rates, tight fiscal policy and proximity to the US attracted investors.