Europe
While all of today’s headlines have been about margin calls, and the fallout from the Friday block trades on Wall Street, European markets have taken most of this in their stride, with banks feeling the effects of the fallout the most.
Credit Suisse is sharply lower, its problems with Greensill compounded by its exposure to last week’s hedge fund losses, that resulted in large sell offs in ViacomCBS and Discovery.
We’ve also seen some weakness in Deutsche Bank’s share price after it disclosed it had some exposure to the hedge fund in question, but that most of it had been de-risked.
Elsewhere it’s been a pretty positive day, with the FTSE100 lagging behind its European peers, with the DAX looking to close back in on its intramonth record highs led by automakers BMW and Volkswagen leading the way higher.
In the UK it’s more of a mixed bag with the FTSE100 more or less flat on the day, with consumer staples outperforming led by Reckitt Benckiser and BT Group, while on the downside housebuilders are the primary drags, despite a positive update on the sector from JPMorgan.
IPO’s are back in the news today after Deliveroo cut the price range on its upcoming IPO to £3.90 to £4.10, reducing the upper end of the range from £4.60. This lower ceiling appears to be a natural consequence of a number of high-profile investors going cold on the idea of investing in a business which they aren’t completely convinced will turn a profit any time soon. Concerns over working conditions for its riders have been cited as one of the reasons for the reluctance to invest, however there are probably a number of others.
Remaining on the IPO theme, DMGT’s shares are up sharply today on reports that Cazoo, which it has a 20% stake in, is set to become listed on the NYSE, after being acquired by a SPAC, giving it a valuation of around £5bn.
US
US markets have opened lower this morning after Friday’s late ramp to record highs, with financials on the back foot after the weekend story of heavy losses for the likes of Credit Suisse and Nomura, in response to a margin call on one of their clients, with the likes of Goldman Sachs and Morgan Stanley also under pressure due to their exposure to the same customer.
ViacomCBS and Discovery shares have also come under further pressure as investors continued to weigh up the collateral damage of the weekend headlines over hedge fund exposure to these media giants.
We’ve seen big losses in both of these company’s share prices in the past few days, however we are still above the 200-day MA in both cases, and despite the sharpness of the falls, both are still in positive territory for the year.
FX
The pound started the week as one of the best performers today, however the early gains subsided on reports that the US said it could put 25% tariffs on a host of UK exports in retaliation for a tax on tech firms.
On the data front we saw a sharp drop in mortgage approvals in February to 87k from 97.4k in January. At the end of last year approvals had been trending at their best levels since 2007, peaking at 105k in November as the stamp duty holiday buoyed demand. The falloff seen since then can be partially attributed to uncertainty over whether the Chancellor of the Exchequer would extend the stamp duty tax break for a little bit longer in his budget. That he did so could well see an uptick in the March numbers when they get released in a month from now.
Net lending on mortgages rose, while consumer credit fell back as UK consumers decided to rein back spending on their credit cards, and go house hunting instead.
The US dollar is also holding up well as economic data continues to improve, with the latest manufacturing numbers from the Dallas area showing a sharp increase in activity for the month of March.
Reports that the container ship Ever Given has been pulled out of the Suez Canal wall in what looks like could be the first steps towards the reopening of this key artery has seen Brent crude prices slip back a little, as the canal starts to get back on the path to a reopening. With normal service now only a matter of days away, the backlogs could well take longer to clear, but nonetheless the relief is palpable that we won’t see a long-term closure of what is an important trade route.
The stronger US dollar and rise in US 10 year yields back to their daily highs is also weighing on gold prices, ahead of what could be a big announcement later this week from the Biden administration on a long-term infrastructure plan, which is likely to be in the trillions of US dollars.
Reports that Visa was looking at allowing USD Coin on its payment network appears to have given Bitcoin prices a fresh shove higher.
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