Author: Martin North

Martin North is the Principal of Digital Finance Analytics

Schizophrenic Markets Wrestle With Countervailing Trends…

Once again, we saw contention in the markets, as US equities extended a rally Friday as investors weighed strong corporate earnings against concerns about regional banks and inflation. Treasuries rose. investors may still be cautious ahead of Apple’s results due next week and the Federal Open Market Committee (FOMC) meeting and the U.S. jobs report for April.

And later in the day, First Republic once again stole the show.

CONTENTS
0:00 Start
0:15 Introduction
0:40 US Markets
2:14 First Republic
3:26 Sentiment and Positioning
4:50 Economic Data
6:30 Oil
7:10 Europe
8:20 ECB Rate Rises?
9:30 ECB Debt As Government Debt
13:15 Asia
16:20 Australia
20:10 RBA Rate Rises?
20:40 Bitcoin Volatility
22:40 Summary and Close

Overall, the S&P 500 gained 0.8% after better-than-expected earnings from the likes of Exxon Mobil Corp. and Intel Corp., up 1.3% and 4% respectively.

However, the gains proved precarious in midday trading after Federal Reserve officials called for broad changes to bank rules in the wake of Silicon Valley Bank’s collapse and promised tougher supervision and stricter rules for banks.

The Nasdaq 100 rose 0.7%, weighed down by Amazon.com Inc.’s 4% loss after a warning over growth in its key cloud computing business.

Meanwhile, After the market close, First Republic Bank tumbled 49% to $1.77 after reports the regional lender was headed for receivership. That was after the bank’s 43% decline in the regular trading session.

In fact the U.S. Federal Deposit Insurance Corp has asked banks including JPMorgan Chase and PNC Financial Services Group to submit final bids for First Republic Bank by Sunday after gauging their initial interest earlier in the week, Bloomberg News reported today.

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We’re Back (But Its The Same Old, Same Old) With Tarric Brooker…

Journalist Tarric Brooker and I reconnected following my relocation, for the first in our series of bi-weekly afternoon chats about economics and politics. It may be a couple of months since our last, but in many ways, things are the same…

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Playing The Inflation Blame Game!

The Chief Economist at The Bank of England Huw Pill this week argued that there was a need for restraint to contain inflation. He got significant reaction on socials.

And there is an argument that both Unions and Corporates have a vested interest in bidding wages and prices higher – its their job.

But we parse out this argument and highlight the missing actor which was responsible for creating inflation in the first place, and yet now appears to be blaming everyone else.

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The Market’s Game Of Chicken Continues….

US markets remain jittery as fears of a recession continue to build, despite some better than expected earrings reports, form tech. But the key issue relates to financial stability in the regional banking sector as the fall out from First Republic Bank continues. Indeed the regulators and banks are playing chicken – not good considering the 100 or so other institutions which to a greater of lesser effect have the same pressures derived from the rapid rate hike cycle.

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Inflation Does What It Does…

The latest in inflation from the ABS reveals a higher level of underlying inflation, despite the4 base effects people were expecting to see. As result, the expectation for a further round of rate hikes extended in Australia, as the energy and gas prices continue to climb.

That said, some optimistic market analysts are call for rate cuts later in the year – but in your dreams… I am thinking!

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If The RBA Were A Company, The Governor Would Be Out Of A Job!

Where should accountability lay for the decisions of the Central Bank? There are many arguing that more independence is needed, so politicians can claim arms length influence only. On the other hand to date, this approach has not been working, and in a New Daily article Alan Kohler makes some interesting observations.

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Access To Cash Must Be Preserved…

Access to cash is an essential requirement for businesses and households, and this aspect of the current Senate review into Regional Branch Closures is a critical issue.

This same issue is playing out in the UK, and today we look at a recent report which highlights some essential issues. This needs to be incorporated into the Senate’s current thinking.

https://researchbriefings.files.parliament.uk/documents/CBP-9453/CBP-9453.pdf

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Volatility False Signals?

The VIX – or fear index is sitting below 20.00 and some are claiming this means the markets are showing signs of a recovery. However, in fact more options trades are being done on shorter terms than the VIX represents, so it is possible the VIX is broken as a distressed market signal.

Perhaps no surprise to see the CBOT will be releasing a new index, based on zero day options, where nearly half of all business is being written.

So today we discuss the rationale, and consider the consequences. Perhaps the existing VIX is giving a false signal!

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Operation Blancmange

A further deeper dive into the RBA Review recommendations. I felt it was more like blancmange, than a piece of innovative reform – not least because the proposed structural separation and targetting are close to that used by other Central banks, who make precisely the same mistakes as our own.

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