By Jeffrey Smith
Investing.com — The bond market is swinging back, expecting a 25 basis point hike from the Federal Reserve next week as the knee-jerk reaction to last week’s bank collapse fades. Credit Switzerland looks more and more like the next shoe to fall, as a key donor says he can’t (or won’t) pump any more money. Retail sales for February are scheduled and expected to show a decline from an abnormally strong reading in January. The Chinese economy is enjoying a moderate recovery, according to new data, while French inflation and a solid industrial production report for January keep the ECB on track for a sharp hike at Thursday’s meeting. And oil hits a 15-month low as global inventories grow. Here’s what you need to know in the financial markets on Wednesday, March 15.
1. Market swings back and expects a rate hike by the Fed
The idea that it would halt its rate hikes over fears of provoking a bank collapse proved short-lived.
are now forecasting another 25 basis point hike at next week’s Fed meeting as bond yields reversed much of their decline in response to the collapse of Silicon Valley Bank and signature bank (NASDAQ:). That’s partly due to the fact that February Tuesdays didn’t fall far enough to convince anyone that the battle with inflation is over, but it’s also due to the realization that a pause to rate hikes could be taken as a sign of panic, undoing good work done over the weekend to stabilize the situation.
More key economic data comes out at 08:30 ET (12:30 GMT), with a 0.3% drop expected for February, which would follow January’s exceptionally strong 3.0% increase.
2. China’s lukewarm recovery; Eurozone data keeps the ECB on track for a 50 basis point hike
New data from China pointed to a solid if unspectacular recovery from the COVID ravages of late 2022.
led the way, with a year-on-year increase of 3.5% in the first two months of the year, as growth accelerated to 5.5%, a sign that the real estate sector may have bottomed out. However, it only increased by 2.4%, less than expected, and there was a worrying increase in , especially among the younger age cohorts.
Data out of the Eurozone was no longer encouraging as a major upward revision of everything wiped out any remaining hopes of cutting plans for a 50 basis point rate hike on Thursday. also positively surprised, with an increase of 0.7% in January.
3. Stocks fall as Credit Suisse makes the market nervous
US equities are expected to open sharply lower as fear once again replaces relief as the dominant emotion. In particular, Tuesday’s strong rise in regional bank stocks has given way to a more nuanced picture.
Moody’s again reflected broader sentiment by downgrading the credit outlook for the entire US banking sector to negative. Credit Suisse (SIX:) provided an eerie, if unrelated echo, falling 22% in Europe after Saudi National Bank (TADAWUL:) said it could (or would not) pump more money into the troubled lender.
At 06:30 ET, we were down 470 points or 1.5%, were also down a similar amount, and were down slightly less, down 1.4%.
Facebook owner Meta Platforms (NASDAQ:) is consolidating in premarket after hitting a 9-month high on Tuesday in response to its latest slimming exercise. Adobe (NASDAQ:) leads a meager post-close earnings list lennar (NYSE:) is higher after better-than-expected Tuesday night news.
4. Samsung reveals massive investment in chipmaking as South Korea responds to IRA
Samsung (KS:) said it will invest about $230 billion in its chip manufacturing facilities over the next 20 years. The investment accounts for more than half of the investment envisaged in a new plan by the South Korean government to support a key sector of the economy, which is uneasily caught in the middle of the battle for global supremacy between the US and China sits.
South Korea’s 550 trillion won ($1 = 1,316 won) plan also provides extensive tax breaks to boost the competitiveness of display and battery manufacturers. The plan follows the Inflation Reduction Act and similar initiatives in Europe and represents a further escalation of the global race to subsidize strategic industries in the new economy.
5. Oil hits 15-month low as inventories grow
Crude oil prices fell to a 15-month low as fears for the global economy mounted following the collapse of US banks. The relatively weak recovery in industrial production in China also caused some bets on Chinese demand to be scaled back.
At 07:00 ET, futures were down 1.6% to $70.22 a barrel, while falling 1.6% to $76.22 a barrel.
On Tuesday, OPEC left its forecast for global oil demand growth unchanged at 2.3 million barrels per day this year, expecting a slowdown outside China to offset the pick-up in demand there. The International Energy Agency said in its latest monthly report that global inventories had hit an 18-month high, creating a significant buffer to cope with an expected market tightening later this year.
The US government will release it at 10:30 am ET.