Week in Review: 1-5 May 2023

Weekly Market News and Comments

"The second and third biggest bank failures in US history have followed in quick succession. The US Treasury and Federal Reserve would like us to believe that they are “idiosyncratic”. That is a dangerous evasion.

Almost half of America’s 4,800 banks are already burning through their capital buffers. They may not have to mark all losses to market under US accounting rules but that does not make them solvent. Somebody will take those losses."

It is clear at this moment that the central banks are trying to keep the banks from crumbling, while (pretending that) they are fighting inflation with high interest rates. The FED and the ECB raised reference interest rates by 25 bps, but a pause will likely happen soon. In a year from now, rates will be decreasing. Injections of capital to the banks (one way or another) will happen in the meanwhile, no doubt. Let's see how much the economy slows down in the process - it's a matter of waiting a few months. Until then, be very critical of where you invest.

The number of job openings in the United States dropped by 384,000 to 9.6 million in March 2023, the lowest level since April 2021 and below the market's expectation of 9.775 million, indicating that the labor market may be cooling off. However, the unemployment rate in the United States edged down to 3.4 percent in April 2023, matching a 50-year low.

For the week, stock markets are mixed, with the S&P500 down 0.8 %, the NASDAQ up 0.1 %, and the RUSSEL 2000 down 0.5 %. Gold is up 1.3 % and silver 2.4 %. The barrel of WTI is now back to ~71USD, down ~7 % for the week. Natural gas dropped significantly (-12 %), down to ~2 USD/MMBtu

The relative strength of the US dollar dropped slightly (-0.44 %). The US 10-year yield is unchanged (~3.4 %), and the yield curve is now downward sloping until 2030 (the curve is now uninverted for the 20Y and 30Y maturities).

Next week, in the US, economic news will be dominated by the inflation rate, producer prices, and export and import prices, as well as the Michigan consumer confidence CPI gauge.

Sources:

https://finance.yahoo.com/news/half-america-banks-already-insolvent-133000968.html

https://tradingeconomics.com/

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