March 24, 2023
- The US and Canada are poised to announce a deal to rewrite an immigration accord that has driven people to cross the border between the two countries by land to refile asylum claims, a key irritant between the governments, people familiar with the talks say. Joe Biden arrived in Ottawa Thursday for his first visit to Canada as president. Tensions over migration have hung over the trip, with Canadian Prime Minister Justin Trudeau under pressure to secure a deal with Biden to rewrite the pact. The terms of the deal are still taking shape could change before an announcement planned for Friday, but both countries would agree to effectively rewrite the Safe Third Country Agreement to treat all border crossings the same, removing the incentive for people to cross by foot, the people said, speaking on condition of anonymity. In exchange, Canada would agree to take 15,000 more people in through formal channels.
- European stocks declined for the second day, trimming weekly gains, as banking shares resumed their slide as sentiment remained fragile and Deutsche Bank AG shares slumped. The Stoxx Europe 600 Index dropped 1.6% by 10:22 a.m. in London. Banks led the retreat, with Deutsche Bank shares sliding as much as 15%, while credit-default swaps surged. Other banks with high exposure to corporate lending also declined, with Commerzbank AG dropping more than 9% and France’s Societe Generale SA falling more than 8%. European stocks are trimming their first week of gains in three following the turmoil in the US banking sector and collapse in Credit Suisse’s shares that resulted in a takeover by UBS.
- US equity futures fell, wiping out earlier gains, and declines in European stocks were led by banks as concerns about the stability of the sector gripped traders before the weekend. With a risk-averse mood spreading through markets, bonds and the dollar rallied. Contracts on the S&P 500 sank 0.7%, while those on the Nasdaq 100 slid 0.4% after the underlying gauge approached the threshold of a bull market Thursday. Investors are fleeing to cash in the biggest rush since the onset of the pandemic as concerns of an economic slowdown mount, according to Bank of America Corp. strategists who see equity and credit markets slumping in coming months.
- Asia equities were set to snap a three-day rally as lingering concerns over the health of the banking sector pushed a gauge of the region’s financial shares lower. The MSCI Asia Pacific Index fell as much as 0.5% before trimming losses, with its 11 sectoral sub-gauges showing mixed moves. Most markets declined, led by Hong Kong’s Hang Seng Index, while Chinese tech shares extended their rally on the back of positive earnings. An index of Asian financial stocks dropped as much as 0.9%, tracking overnight declines in a measure of US financial heavyweights to the lowest since November 2020. Treasury Secretary Janet Yellen’s comments that authorities can take further steps to protect the banking system if needed failed to fully assuage concerns.
- Oil slumped the most in over a week, tracking a slide in equity markets and feeling the effects of a stronger dollar. West Texas Intermediate fell as much as 4.4%, the most since March 15. That would eliminate most of its gains for the week. Crude remains on course for its steepest first-quarter drop since 2020, when the pandemic wiped out demand. A potential US recession, robust Russian oil flows in the face of Western sanctions, and strikes at refineries in France have all proved bearish forces.
- Gold declined after rising for two sessions as traders assessed mixed signals on monetary policy from the Federal Reserve. Bullion is poised to end the week down 0.2% after almost paring an earlier slump. The metal edged lower on Friday as the dollar strengthened, but is still being supported by haven demand following the collapse of three US banks and earlier turmoil at Credit Suisse Group AG. Spot gold declined 0.4% to $1,984.70 an ounce as of 8:56 a.m. in London. The Bloomberg Dollar Spot Index rose 0.4% and is down 0.8% for the week. Silver was steady, while platinum and palladium declined.
- Euro-zone economic growth continued to pick up in March, driven exclusively by the service sector as concerns over energy supplies recede. The overall rate of expansion rose to the highest level in 10 months, according to business surveys by S&P Global. Manufacturing output broadly stagnated, however, only supported by a backlog of orders as demand continued to fall. “Growth has been buoyed since the lows of late last year as recession fears and energy market worries fade, inflation pressures ease and the unprecedented supply chain delays seen during the pandemic are replaced with record improvements to supplier delivery times,” said Chris Williamson, an economist at S&P Global.
- A Federal Reserve facility that gives foreign central banks access to dollar funding was tapped for a record $60 billion, in a week of banking stress that has roiled markets. The demand came through the Fed’s Foreign and International Monetary Authorities Repo Facility and encompasses the week through March 22. The Fed didn’t provide information on who accessed the funding. The facility was established in the midst of the pandemic and is designed to help ease any pressures in global dollar funding markets. It allows foreign central banks to post their US Treasury holdings as collateral in exchange for dollar liquidity, which is often in high demand during times of stress.
- Global bonds rallied on Friday as renewed concern over the banking sector spurred demand for safe assets and fueled bets central banks won’t be able to keep raising rates for long. Yields on US Treasuries and European sovereign bonds slid, led by short-end debt that is more sensitive to policy changes. Investors turned to havens as bank shares slumped after Bloomberg News reported Credit Suisse Group AG and UBS Group AG are among lenders under scrutiny in a US Justice Department probe into whether financial professionals helped Russian oligarchs evade sanctions. UBS shares plunged as much as 8.2%. The moves on Friday extended a rally in bonds ignited by the fallout from three US lenders failing and the takeover of Credit Suisse, which has fueled bets policymakers around the world will become more cautious on raising interest rates. That view was underscored this week by the Federal Reserve, which tempered its language around how much additional tightening it might do, even as it delivered another quarter-point hike.
- Credit Suisse Group AG and UBS Group AG are among banks under scrutiny in a US Justice Department probe into whether financial professionals helped Russian oligarchs evade sanctions, according to people familiar with the matter. The Swiss banks were included in a recent wave of subpoenas sent out by the US government, the people said. The information requests were sent before the crisis that engulfed Credit Suisse and resulted in UBS’s proposed takeover of its rival. Subpoenas also went to employees of some major US banks, two people with knowledge of the inquiries, said. The Justice Department inquiries are focused on identifying which bank employees dealt with sanctioned clients and how those clients were vetted over the past several years, according to one of the people. Those bankers and advisers may then be subject to further investigation to determine if they broke any laws.
- European companies are using more natural gas as prices drop to levels seen before the Ukraine war, putting a potential strain on preparations for another winter with limited Russian supplies. The green shoots are mainly evident in the refining industry, which can switch more easily between raw materials ranging from natural gas to fuel oil. Earlier this month, Dutch data showed the country’s petroleum sector had the biggest weekly gain in gas use this year, while French and Spanish gas network figures indicated refiners’ demand advanced in February from a year earlier. The speed of the recovery will be crucial for the European Union and how it readies for a second winter with no pipeline gas from Russia. Rebounding demand could push prices past €100 ($109) per megawatt-hour this year, from about €43 now, and chip away at stockpiles, according Swedish bank SEB AB. It’s a view echoed by Vitol Group, one of the biggest gas traders.
- Deutsche Bank AG became the latest focus of the banking turmoil in Europe as ongoing concern about the industry sent its shares slumping the most in three years and the cost of insuring against default rising. The bank, which has staged a recovery in recent years after a series of crises, said Friday it will redeem a tier 2 subordinated bond early. Such moves are usually intended to give investors confidence in the strength of the balance sheet, though the share price reaction suggests the message isn’t getting through. “It is a clear case of the market selling first and asking questions later,” said Paul de la Baume, senior market strategist at FlowBank SA. “Traders do not have the risk appetite to hold positions through the weekend, given the banking risk and what happened last week with Credit Suisse and regulators.”
- Ford Motor Co. projects its electric F-Series pickup factory under construction in Tennessee will ultimately produce half a million trucks a year, about 40% more than the company forecast in November. The automaker is ramping up the facility as it seeks to reverse losses on electric vehicles, which it expects to reach about $3 billion this year. The Stanton, Tennessee, plant — Ford’s first all-new assembly facility in a half-century — is part of a $5.6 billion compound known as BlueOval City that will include a sprawling battery factory by South Korea’s SK On, a unit of SK Innovation Co. The six-square mile complex is due to open in 2025 and employ 6,000 workers. The higher output means the Tennessee plant would account for a quarter of the 2 million EVs Ford plans to build annually by the end of 2026, though the company didn’t say when it will reach full capacity.
- Customers Bancorp Inc., a small Pennsylvania lender whose holding company is led by Jay Sidhu, is exploring a deal for all or part of the failed Silicon Valley Bank, according to people familiar with the matter. The bank has been seeking potential co-investors for a deal for Silicon Valley Bank, said the people, who asked to not be identified because the matter isn’t public. A final decision hasn’t been made and Customers Bancorp could opt against pursuing a deal, the people added. The Federal Deposit Insurance Corp., which seized Silicon Valley Bank this month, has been seeking to unload the lender for about two weeks now. The FDIC is seeking bids this Friday for the company, people familiar with the matter said this week.
- Cathie Wood snapped up more shares of Block Inc. and Coinbase Global Inc. as turmoil engulfed both companies Thursday. The daily trading report from Wood’s firm ARK Investment Management showed that three of its exchange-traded funds bought about 338,000 shares of Block in the session, during which the payments firm plunged 15% after becoming the target of activist short seller Hindenburg Research. At the same time, two of the funds added a combined 269,000 shares of Coinbase, which slumped 14% after disclosing it faces potential regulatory action from the Securities and Exchange Commission. Both companies are among Wood’s top holdings.
- Twitter will begin removing so-called legacy verified marks from user accounts next week, as it works toward a model where only paid subscribers and members of approved organizations have that status. The move to strike legacy verification begins Apr. 1, the San Francisco-based company said in a tweet Thursday. It’s one of the earliest policy changes announced by owner Elon Musk, who described the existing program as “corrupt” shortly after taking over late last year. Musk has changed his mind about several changes at the social network, but has remained steadfast in his desire to eliminate the old verification system. Twitter has made the blue verification mark a major feature of its Twitter Blue subscription offering, which Musk began pricing at $8 per month and now promotes as the best way to both enjoy and improve the service. Twitter’s bot problem would also be solved by more paying subscribers, Musk says. Paying Blue users get higher priority in replies and searches, helping to fight scams and spam, according to the company. They also receive half the ads and are able to edit tweets.