CAC40: -3.4%, despite a spectacular drop in rates

( – The CAC40 (-3.4% to 6,900) does not find its salvation in the evolution of the US indices: they reopened down -1.5% and increase their loss to -2% for the Dow Jones and -1.8% on the S&P500) in the wake of the banking sector, with First Republic at -15%.
In Europe, Paris is not the most affected place since Madrid fell by -3.8% and Milan by -4.3%.

The CBOE volatility index, often dubbed the barometer of fear on Wall Street, jumped 15% towards 27.00.
But Wall Street is, like the European markets, hit hard by a wave of stress, of which the bankruptcy of SVB and Signature were only the beginnings of a much deeper crisis which had been simmering for months at the bottom of the balance sheets of large banks. who would have ‘poorly managed’ their risks (undervalued, poorly modeled) when the cost of money was zero.

In Paris, Sté Générale fell by more than -14%, towards 21.2E, BNP-Paribas by -12%, Crédit Agricole -8%… a suspension of quotations having been necessary at lunchtime.
After the shock wave of the bankruptcy of ‘SVB’ and ‘Signature Bank’ here is a much larger and more explosive file: it is the collapse of -20% of Credit Suisse (around 2E) – released by its main Saudi shareholder – which seems to record its probable bankruptcy (anticipated at more than 50% if we trust the CDS which are soaring towards 900pts).
As with Lehman, the fall of a systemic bank puts all of its counterparties at risk.
What particularly stresses the markets is the silence of the Swiss authorities who are observing a rather incomprehensible silence: Bruno Lemaire has asked to speak with his Swiss counterpart this evening (he must not be the only one)!
The difficulties of Credit Suisse are not new, the sudden rise in interest rates seem to precipitate its fall: how many of its borrowing customers find themselves in difficulty by the increase in the cost of money… which follows inflation?
In this climate, the figures of the day take second place: in Europe, investors took note of the latest data on inflation in France. The consumer price index (CPI) increased by 1.0% over one month in February 2023, after +0.4% in January. Inflation thus rose to 6.3% over one year according to INSEE.

In the United States, participants discovered the Empire State of the New York Fed: the so-called ‘Empire State’ index fell from -5.8 in February to -24.6 this month (consensus -7 ,4).
The New Orders Index fell fourteen points to -21.7, indicating that orders have fallen significantly, and the Shipments Index fell fourteen points to -13.4, indicating lower shipments.
US business inventories fell in January, notably due to a sharp rise in sales, according to data released Wednesday by the Commerce Department.
Inventories fell 0.1% last month, after rising 0.3% in December (revised figure).
Business sales rose 1.5% after falling 0.6% the previous month. They show an increase of 5% on an annual basis.
At the current rate, it therefore takes them 1.34 months to sell their stocks, compared to 1.36 months in December.
A pleasant surprise, however, are producer prices in the United States.
They showed an unexpected fall of -0.1% in February (the consensus was at +0.3%), the sharp drop in food prices having come on top of the ebb in energy costs.
Over one year, its rise was 4.6%, against 6% the previous month, confirming the trend towards moderation of inflation in recent months.
Core inflation recorded a slight increase of 0.2% after rising 0.5% in January and stood at 4.4% annualized, after 4.5% the previous month.
Rates are easing sharply in Europe the ECB should abandon its plan to raise rates by 50 basis points and settle for 25 Pts, see ‘missing its turn’: the fall of -1.8% of the Euro towards 1, 0550 seems to indicate that well-informed operators know that the ECB will seek to reassure the markets.
Long rates fell -30Pts on our OATs (-48Pts on the ‘2-year’ at 2.545%) and -31Pts on Bunds, US T-Bonds posted -22Pts at 3.415%.

The most spectacular is on the side of US short rates with the ‘2 years’ which unscrewed by -50Pts towards 3.80%, the ‘1 year’ erases -35Pts towards 4.12% (against 5.25% a week earlier ).

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