EUROPEAN EQUITY OPEN: Indices open higher, buttressed by optimism in the banking sector, but still on course for a second week of losses

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  OVERNIGHT: Wall Street was risk-on on the global banking support theme, after SNB gave a lifeline to Credit Suisse while 11 large US banks teamed up to help First Republic (FRC) (see here). Asian stocks were positive amid the improved global risk appetite after recent distressed bank lifelines (see here).


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  EUROPEAN OPEN: European equity indices open the last trading session of the week on the front foot, although the broad Stoxx 600 and the narrow Eurostoxx 50 gauge of blue chips are both on course for a second straight week of losses. The mood is being underpinned by positive developments in both the European and US banking sectors on Thursday, where the SNB gave Swiss banking giant Credit Suisse (CSGN SW) liquidity support, while stateside, large banks have made deposits within First Republic Bank (FRC), shoring up its liquidity. That said, some are still nervous about the health of the banking sector, after data revealed that lending at the Fed’s Discount Window spiked by a record high this week (see below). Elsewhere, ECB officials have been on the wires early doors (Villeroy and Muller), reassuring that they remain committed to fighting inflation, and reassuring about the health of banks in the region. There may be some additional focus on the ECB’s TLTRO.III repayment for the March window, which will be announced later today; given the central bank’s +50bps rate hike this week, the higher rate could prompt some of the "healthier" banks to repay earlier than otherwise needed, analysts said, but recent banking turmoil could serve as a headwind to this logic, given liquidity needs; ING notes that banks needed to tell the ECB by Wednesday evening their decision, which some suggest makes it more likely that they would cling onto their liquidity, which could imply a lower repayment number.


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  STOCK SPECIFICS: Our full European equity briefings for March 17th can be accessed here and here.


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  FED'S DISCOUNT WINDOW: Weekly Fed balance sheet data released Thursday revealed that lending at the Fed's discount window spiked by a record amount; the central bank's 'emergency loans' stood at USD 318bln (vs USD 15bln W/W). Its new BTFP programme total outstanding amount was USD 11.9bln as of March 15th; Fed said there was USD 15.9bln total collateral under new bank term funding programme; the Fed balance sheet size jumped to USD 8.69tln on March 15th, from USD 8.39tln on March 8th, the highest since November; other credit extensions rose to USD 142.8bln as of March 15th from zero on March 8th. Capital Economics said that it showed the scale of the stresses in the financial system, and was a far more severe liquidity crunch than at the start of the pandemic (emergency loans peaked at USD 130bln then), and not far off the financial crisis peak of USD 437.5bln in 2008. "The size of the spike in the Fed’s emergency lending underlines that this is a very serious crisis in the banking system that will have significant knock-on effects on the real economy," CapEco wrote.

DAY AHEAD:

• Today is  Quadruple Witching.


• Our real time events calendar can be accessed here; a PDF version can be accessed here.


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  EUROPE: Final Eurozone inflation data for February is expected to be confirmed at 8.5% Y/Y. There will also be attention on Labour Costs data for Q4, as well as Wages data for Q4. The ECB will announce its TLTRO.III repayment for the March window, and given its +50bps rate hike this week, the higher rate could prompt some of the "healthier" banks to repay earlier than otherwise needed, analysts said, but recent banking turmoil could serve as a headwind to this logic, given liquidity needs.


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  NORTH AMERICA: The prelim University of Michigan sentiment survey for March will be looked at, with a particular focus on the consumer inflation expectations components; earlier in the week, the NY Fed's Consumer Expectations Survey showed expected inflation one-year from now eased to 4.2% in February from 5.00% in January, to the lowest since May 2021. Elsewhere, Industrial and Manufacturing Production data for February, the Leading Index for February as well as Canadian PPI and RMPI for February are all due.


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  RATINGS: Today's ratings agenda includes possible reviews from S&P on Spain, DBRS on Netherlands, Fitch on Turkey, and Moody's on Greece.


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  ENERGY: Weekly Baker Hughes rig count data is due.

17 Mar 2023 - 08:10- Fixed IncomeData- Source: Newsquawk