" European and Asian stocks rattled after sell-off in US bank shares
Fears over health of banks’ bond portfolios compound nervousness ahead of publication of key US economic dataFT.com
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Martha Muir in London and William Langley in Hong Kong
51 MINUTES AGO
"European and Asian equities tumbled in morning trade on Friday as fears over the health of banks’ bond portfolios rattled nervous investors around the world.
The region-wide Stoxx 600 fell 1.4 per cent, hit by declines in bank stocks such as Deutsche Bank and Société Générale, which fell 7.7 per cent and 4.6 per cent respectively.
The Stoxx bank index lost 4 per cent, its worst one-day performance since last June.
✓ London’s bank-heavy FTSE 100 was down 2 per cent.
✓ In Asia, Hong Kong’s Hang Seng index was down 3 per cent, China’s CSI 300 shed 1.3 per cent, South Korea’s Kospi declined 1 per cent and Japan’s Topix lost 1.9 per cent.
The sharp falls were sparked by a widespread sell-off overnight in US bank stocks, which analysts linked to problems at Silicon Valley Bank, a small US lender.
✓ The S&P 500’s financial sub-index lost 3.9 per cent on Thursday.
✓ SVB’s losses shifted investor attention to the potential risks in the large portfolios of bonds held by banks, which invested deposits into long-dated securities such as Treasuries at the height of the pandemic. The prices of those assets tumbled in last year’s global bond market rout, meaning banks would realise large losses on their holdings if they are forced to sell.
“An earthquake in Silicon Valley led to aftershock on Wall Street and the tremors could still be felt in London on Friday morning,” said Russ Mould, investment director at AJ Bell, a UK investment platform.
“Lots of banks hold large portfolios of bonds and rising interest rates make these less valuable — the SVB situation is a reminder that many institutions are sitting on large unrealised losses on their fixed-income holdings.”
The declines compounded investors’ nervousness ahead of the publication of the closely watched non-farm payrolls data, due out later on Friday.
Stocks and bonds have already been jolted this week by comments from the Federal Reserve that it would be prepared to reaccelerate the pace of interest rate increases if the US economy and inflation do not cool. . ." READ MORE
Recession Risk Looms Large as Bond Markets Price in Steeper Rate Hikes Globally
Garfield Reynolds, Michelle Jamrisko
1 minute
Resilient economies, stubborn inflation reshaped the outlook
Some central banks in pause mode, gauging lagged effects
Deepening Bond Yield Inversion Suggests Hard Landing
"Forget
about interest-rate cuts. The bond market is now pricing in a steeper
path for monetary tightening by central banks around the world, raising
the danger of recessions as policymakers struggle to bring inflation
under control.
Just weeks ago, traders were expecting almost every
developed-market central bank to cut benchmark rates within a year, the
swaps market showed."
Emerging-market central banks have tried to strike a difficult
balance, and are largely looking for the opportunity to pause
tightening. For the major central banks in the US and Europe, however,
the only way is up.
“We think central banks have more work to do,”
Luigi Speranza, BNP Paribas SA chief economist, said in a report
Tuesday. “We continue to believe that rate cuts by major central banks
remain off the table for the rest of the year.”
. . .Prompting the shift: a raft of developments that showed Federal
Reserve Chair Jerome Powell and a number of his counterparts may need to
step up efforts to contain the worst cost-of-living surge in decades.
Central banks again appear on the back foot as a resilient US job
market, China’s post-pandemic reopening and a mild European winter
combine to keep price pressures hot.
“It feels at this juncture
that many central banks are still behind the curve and there’s a lot of
catching up to do,” Catherine Yeung, Hong Kong-based investment director
at Fidelity International, told Bloomberg Radio Wednesday."
U.S. stocks are mostly lower in subdued trading, adding to
weekly losses following this week's hawkish Congressional testimony from
Fed Chairman Jerome Powell.
The S&P 500 March futures ESH23 dipped hard on Tuesday’s
trading as Fed Chairman Jerome Powell testified before the House
Financial Services Committee and were poised to trade lower in
Wednesday’s trading but recovered slightly after Powell’s remarks.
BNN Bloomberg's mid-morning market update: Mar. 9, 2023
"U.S. stocks reversed gains as
investors search for signs of a cooling labour market and tried to
interpret a surprise spike in unemployment claims.
✓ S&P 500 and the tech-heavy Nasdaq edged lower in uneven trading
as traders positioned ahead of Friday’s jobs data. An index of the
dollar slumped while short-term Treasury yields tumbled.
✓ Cryptocurrencies slid with Bitcoin falling to the lowest in nearly a
month after the crypto-tied bank Silvergate Capital Corp. collapsed
overnight amid growing scrutiny in Washington. Other financial stocks
also fell dragged down by SVB Financial Group which sank over 40 per
cent the most in 24 years.
Thursday’s data showed weekly jobless claims had risen to 211,000
during the week ending March 4, ahead of expectations for 195,000 and
marking the first time claims surpassed 200,000 since early January.
“This is a tiny glimmer of hope that maybe the U.S. labour market
isn’t quite as tight as the other data points are saying,” Fiona
Cincotta, senior financial markets analyst at City Index, said by phone.
“This is a preshow before the main event.”
The numbers set the stage for Friday’s monthly jobs report, with even
just slightly stronger-than-forecast figures expected to cement bets
for a bigger hike at the March 21-22 Fed meeting. Economists project a
225,000 increase in February payrolls, about half January’s blockbuster
pace, but a figure in that range would confirm the U.S. economy
continues to add jobs at a strong rate.
A softer-than expected number could soften wagers on a half-point
move in March, and tilt expectations back to a quarter-point hike.
“The market had to do a pretty quick job of repricing higher rate
expectations from the Fed after a couple of days of Chair Powell’s
testimony on Capitol Hill,” said Art Hogan, chief ma I'mrket strategist at
B. Riley Wealth. “We now become data-dependent until the Fed meets.”
Two-year yields’ premium over their 10-year equivalent narrowed after
the data to around 102 basis points, having surpassed 110 basis points
earlier this week.
The inversion is considered a reliable recession
harbinger.
Key events this week:
Bank of Japan policy rate decision, Friday
U.S. nonfarm payrolls, unemployment rate, monthly budget statement, Friday
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.2 per cent as of 12:05 p.m. New York time
The Nasdaq 100 rose 0.2 per cent
The Dow Jones Industrial Average fell 0.2 per cent
The Stoxx Europe 600 fell 0.2 per cent
The MSCI World index fell 0.1 per cent
Currencies
The Bloomberg Dollar Spot Index fell 0.2 per cent
The euro rose 0.3 per cent to US$1.0573
The British pound rose 0.6 per cent to US$1.1917
The Japanese yen rose 0.7 per cent to 136.43 per dollar
Cryptocurrencies
Bitcoin fell 2.6 per cent to US$21,432.63
Ether fell 1.8 per cent to US$1,524.95
Bonds
The yield on 10-year Treasuries declined two basis points to 3.97 per cent
Germany’s 10-year yield was little changed at 2.64 per cent
Britain’s 10-year yield advanced three basis points to 3.80 per cent
Commodities
West Texas Intermediate crude rose 0.3 per cent to US$76.90 a barrel
Gold futures rose 0.7 per cent to US$1,830.60 an ounce
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FBI investigates data breach impacting U.S. House members and staff
Sergiu Gatlan
7 - 9 minutes
"The FBI is investigating a data breach affecting U.S. House of
Representatives members and staff after their account and sensitive
personal information was stolen from DC Health Link's servers.
DC Health Link is the organization that administers the health care plans of U.S. House members, their staff, and their families.
Impacted individuals were notified today of the breach in an email
from Catherine L. Szpindor, the U.S. House Chief Administrative Officer,
as first reported by DailyCaller.
Update March 08, 18:24 ET: In a statement to
BleepingComputer, Adam Hudson, the Public Information Officer for Health
Benefit Exchange Authority, confirmed that some of the stolen DC Health
Link data was exposed online and that notifications will be sent to
those affected.
"We can confirm reports that data for some DC Health Link customers
has been exposed on a public forum. We have initiated a comprehensive
investigation and are working with forensic investigators and law
enforcement. Concurrently, we are taking action to ensure the security
and privacy of our users’ personal information. We are in the process
of notifying impacted customers and will provide identity and credit
monitoring services. In addition, and out of an abundance of caution,
we will also provide credit monitoring services for all of our
customers. The investigation is still ongoing and we will provide more
information as we have more to share."
Update March 09, 10:15 EST:NBC News reports
that House Speaker Kevin McCarthy and House Minority Leader Hakeem
Jeffries said in a letter to the head of the DC Health Benefit Exchange
Authority that the FBI had purchased some of the stolen information put
up for sale online.
Stolen data already up for sale online
While the email sent by House CAO Szpindor doesn't have any details
regarding the stolen data, BleepingComputer discovered that at least one
threat actor (known as IntelBroker) is selling the U.S. House members'
information stolen from DC Health Link's servers on a hacking forum.
A sample of stolen data with the database header shows it contains the
information of roughly 170,000 affected individuals, including their
names, dates of birth, addresses, email addresses, phone numbers, Social
Security Numbers, and much more (the entire list is available below).
Subscriber ID,Member ID,Policy ID,Status,First Name,Last Name,SSN,DOB,Gender,Relationship,Benefit Type,Plan Name,HIOS ID,Plan Metal Level,Carrier Name,Premium Amount,Premium Total,Policy APTC,Policy Employer Contribution,Coverage Start,Coverage End,Employer Name,Employer DBA,Employer FEIN,Employer HBX ID,Home Address,Mailing Address,Work Email,Home Email,Phone Number,Broker,Race,Ethnicity,Citizen Status,Plan Year Start,Plan Year End,Plan Year Status
The data was posted for sale on Monday, March 6, and IntelBroker
claims it was stolen after breaching the DC.gov Health Benefit Exchange
Authority.
U.S. House members' data up for sale (BleepingComputer)
"I am looking for undisclosed amount in XMR crypto currency. Contact
me on keybase @ IntelBroker. Middleman only," the threat actor says.
✓ The threat actor also claims that the stolen information has already been sold to at least one buyer." READ MORE
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The FBI is investigating a data breach affecting U.S. House of
Representatives members and staff after their account and personal
information was stolen from DC Health Link's servers.
Bitwarden's credentials autofill feature contains a risky behavior
that could allow malicious iframes embedded in trusted websites to steal
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Microsoft says the latest Windows 11 build that is rolling out to
Insiders in the Canary channel will try to enable Local Security
Authority (LSA) protection by default.
Fortinet has disclosed a "Critical" vulnerability impacting FortiOS
and FortiProxy, which allows an unauthenticated attacker to execute
arbitrary code or perform denial of service (DoS) on the GUI of
vulnerable devices using specially crafted requests.
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features such as File Explorer access keys, a new VPN status indicator,
and a new way to copy two-factor authentication (2FA) codes from text
messages.
The Medusa ransomware gang is demanding a $1,000,000 ransom from the
Minneapolis Public Schools (MPS) district to delete data allegedly
stolen in a ransomware attack.
Privacy-focused search engine DuckDuckGo has launched the first beta
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security.
“We have the setup for a recession unfolding” as the Fed responds to
inflation, Ken Griffin, the chief executive officer and founder of hedge fund giant Citadel, said in an interview in Palm Beach, Florida.
Deepest Bond Yield Inversion Since Volcker Suggests Hard Landing
Michael MacKenzie and Liz Capo McCormick
6 - 7 minutes
(Bloomberg)
-- The bond market is doubling down on the prospect of a US recession
after Federal Reserve Chair Jerome Powell warned of a return to bigger
interest-rate hikes to cool inflation and the economy.
As
swaps traders priced in around a full percentage point of Fed hikes
over the next four meetings, the yield on two-year Treasury notes
touched 5.08% on Wednesday, its highest level since 2007. Critically,
longer-dated yields remained in check, with the 10-year rate under 4%
and the yield on 30-year bonds lower.
As a result, the
closely-watched spread between 2- and 10-year yields this week showed a
discount larger than a percentage point for the first time since 1981,
when then-Fed Chair Paul Volcker was engineering hikes that broke the
back of double-digit inflation at the cost of a lengthy recession. A
similar dynamic is unfolding now, according to Ken Griffin, the chief
executive officer and founder of hedge fund giant Citadel.
“We
have the setup for a recession unfolding” as the Fed responds to
inflation, Griffin said in an interview in Palm Beach, Florida.
Longer-dated
Treasury yields have failed to keep pace with the surging two-year
benchmark since July, creating a curve inversion that over the decades
has amassed a record of anticipating recessions in the wake of
aggressive Fed-tightening campaigns.
In general, such inversions
preceded economic downturns by 12 to 18 months. The odds of another
occurrence are intensifying after Powell’s comments indicate he is open
to reverting to half-point rate hikes in response to resilient economic
data. The Fed’s quarter-point hike on Feb. 1 was the smallest since the
early days of the current cycle. . ."
Deepest bond yield inversion since Volcker suggests hard landing
Michael MacKenzie & Liz Capo McCormick
/
Bloomberg
March 08, 2023 10:58 am +08
4 - 5 minutes
. . .Dragged down
✓ US stocks extended the decline they’ve suffered over the past month,
with the S&P 500 Index notching a 1.5% drop on Tuesday, its biggest
in two weeks. Hopes that the Fed might be near the end of its tightening
cycle had boosted the gauge by over 6% in January.
✓ Meanwhile the dollar, which tends to benefit from both elevated
short-end interest rates and a bid for safety when times are tough, also
surged higher Tuesday, with a Bloomberg gauge rising to its highest
level since early January.
“It is hard to deny the hawkishness of the statement and the message
that markets took away,” strategists at NatWest Markets wrote in a note
to clients. Powell “firmly opened the door” for a return to
50-basis-point moves, although he emphasized the importance of upcoming
data releases, which are “likely to be high vol events,” according to
strategists Jan Nevruzi, John Briggs and Brian Daingerfield.
Powell told members of Congress on Tuesday that there are “two or
three more very important data releases to analsze” ahead of the March
deliberations, and “all of that will go into making the decision.” . .
✓ Some investors think a recession can be averted even as growth slows.
Either way, longer-dated Treasuries are viewed as a viable shelter with
the Fed still raising rates.
Short-maturity yields are the “most vulnerable to repricing higher,”
especially if wage growth resumes rising, favoring a half-point rate
increase, said Ed Al-Hussainy, rates strategist at Columbia Threadneedle
Investments. That will drive “more flattening pressure on the curve.”
5 hours ago · Deepest Bond Yield Inversion Since Volcker Suggests Hard Landing. The surge at the front end of the curve comes even as the 10-year rate remained below 4% ...
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