21 March 2023
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Purchase of Credit Suisse calms markets

By Edward Bell

Financial markets seemed to calm down, eventually, following the quickly arranged sale of Credit Suisse to UBS. Major equity indices closed the day higher while benchmark bond prices had a more muted close. Financial and monetary authorities are now putting more rigorous safeguards under consideration with the US, for example, looking to whether all deposits should be insured, even those above the current limit of USD 250k.

Christine Lagarde, president of the ECB, said that financial stability and price stability were both key to how the bank sets policy but that they can be addressed with separate tools. Martins Kazaks, an ECB governing council member and head of Latvia’s central bank, said he didn’t think the ECB was done hiking rates given that inflation is “still very high” even after large hikes from the ECB to date. He also endorsed the ECB’s plan to move away from forward guidance as a monetary policy tool, saying that it could be “inappropriate, but also counterproductive.”

Both Oman and Kuwait released their CPI inflation figures for February yesterday, recording y/y price growth of 1.9% and 3.2% respectively. For Oman, the February print was broadly flat on the previous month, with price growth back at levels last seen in mid-2021 after coming down from the recent peak of 4.4% recorded in January 2022. In Kuwait, annual price growth has been flat at 3.2%-3.3% since September last year having come down from the recent peak of 4.7% y/y in April 2022.

Today’s Economic Data and Events

  • 14:00 GE ZEW survey expectations Mar: forecast 15.0
  • 16:30 CA CPI y/y Feb: forecast 5.4%
  • 18:00 US existing home sales Feb: forecast 4.2m

Fixed Income

  • US Treasuries had another choppy day, starting off very strongly as markets doubted the viability of the arranged Credit Suisse-UBS deal but then confidence seemed to improve in the market. After an early plunge to below 3.7%, yields on the 2yr UST moved higher over the rest of the day, closing at 3.9763%, up 14bps. The 10yr yield had around a 20bps round trip, getting to as low at 3.3% before gaining and closing up 6bps at 3.4847%.
  • Bond markets in Europe showed similar price action as early gains were faded over the course of the trading day. Yields on 10yr bunds rose by a out 2bps to 2.115% while 10yr gilt yields added 2bps to 3.3%.
  • Emerging market bonds had a rougher showing with a broad index of USD-denominated debt down 0.4% overnight. An index of local UAE USD-denominated debt dropped 0.1% yesterday with a modest widening in spreads.


  • After a quiet start, currency markets swung against the dollar as risk appetite returned. EURUSD added 0.5% to close at 1.0721, its third day in a row of gains and likely bolstered by more hawkish commentary from ECB officials. GBPUSD rose 0.9% to 1.2278 ahead of the Bank of England meeting later this week while USDJPY moved lower by 0.4% to 131.32.
  • Commodity currencies were more mixed. USDCAD moved in favour of the loonie with the pair closing down 0.5% to 1.3664 while AUDUSD gained 0.3% to 0.6718. NZDUSD was the odd one out with a loss of 0.4% to 0.6247.


  • Asian equity indices started the week on the backfoot as the previous week’s concerns around banking sector stability in the US and Europe in particular filtered through. The Hang Seng closed down 2.7%, with the finance index dropping 3.2%. On the mainland, the Shanghai Composite dropped 0.5% while Japan’s Nikkei ended down 1.4%.
  • There was a modicum more of positivity as European markets opened, which strengthened throughout the session. At the close, the FTSE 100 was up by 0.9%, the DAX 1.2%, and the CAC 1.3%. The positivity was prevalent in the US as well as the authorities made pledges over the banking sector. The NASDAQ gained 0.4%, the S&P 500 0.9%, and the Dow Jones 1.2%.
  • Locally, the DFM dropped 0.2% and the ADX 1.1%.


  • Oil prices stabilized overnight with Brent futures up 1.1% at USD 73.79/b and WTI adding 1.4% to USD 67.64/b. Uncertainty over how much of a knock on effect there will be from the strain in financial markets on to commodities will mean a strong rally from here is a challenge and there is potential for more limited downside ahead.
  • Gold prices faded some of their gains from recent near-record levels, having briefly traded above USD 2,000/oz to close lower by 0.5% at USD 1,978.84/oz.

Written By

Edward Bell Head of Market Economics

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