Bank shares are lower again this morning and weighing on broader sentiment. Yesterday we witnessed Deutsche Bank credit default swaps blow out and shares this morning are down 6 per cent. UBS shares fell more than 7 per cent. UBS and Credit Suisse are facing a DoJ investigation over Russian oligarch links. Bill Winters at Standard Chartered says the decision to wipe out CS AT1 bonds will have profound consequences...always the unanticipated consequences of intervention – in this case it’s Merton’s reason number three: Immediate interests overriding long-term interests. EU leaders gather in Brussels today.
Markets
European indices fell by around 1 per cent in early trading on Friday, erasing some of a decent rally this week as investors sought to see the glass half full in the wake of the CS-UBS forced marriage. US bank shares were weaker yesterday with First Republic down 6 per cent and the KRE regional bank ETF off by almost 3 per cent. The Nasdaq was up 1 per cent and the S&P 500 rose a modest 0.3 per cent. As I’ve said many times in the last fortnight – it only stops once people stop asking who’s next. And it doesn’t seem like we’re at that stage yet.
UK retail sales are better than expected – Bailey at the BoE may be right to sound a little more upbeat. Recession avoided for now.
Japan's core CPI slowed thanks to energy support, with the Feb reading at +3.1 per cent, down from 4.2 per cent in Jan.
Off the Block
Payments company Block tumbled after short seller Hindenburg – our old friend that took on Adani – alleged the company had inflated user numbers and facilitated illegal transactions and said it was shorting the stock. Hindenburg said its 2-year investigation “has concluded that Block has systematically taken advantage of the demographics it claims to be helping.” Hindenburg even made a rap compilation video to highlight that rappers have spoken about using Block’s ‘cash app’ payments product for illegal activities. Block said it was considering legal action against Hindenberg for a “factually inaccurate and misleading” report that it said was “designed to deceive and confuse investors”.
Neil Wilson is chief market analyst at Finalto
