• Fed said it is to provide liquidity to US depository institutions in which each Federal Reserve bank would make advances to eligible borrowers.
• European bourses are under substantial pressure, with banking names leading the downside as contagion concern continues, SX7P -5.5%.
• Stateside, futures have been faring comparably better given backstop measures; though, they are well off best with ES U/C while large & small banking names are heavily afflicted.
• HSBC purchased SVB UK; BoE says the UK banking system remains well capitalised. ECB reportedly does not see a direct impact on EZ banks, via RTRS.
• Fixed income is firmer across the board amid a significant dovish adj. to expected Central Bank activity; GS no longer expects a Fed hike at the March meeting.
• Amidst this, the USD has been under pressure while CHF and JPY outperforming on haven allure with commodities lower given risk but USD perhaps cushioning slightly.
• Looking ahead, highlights include US NY Fed Consumer Expectations Survey, BoE's Dhingra.

SVB/BANKS

US/CANADA

• Goldman Sachs said it no longer expects the Fed to hike rates at the March meeting in light of recent stress in the banking system and sees US measures will provide substantial liquidity to banks facing deposit outflows and improve depositor confidence, while it still expects the Fed to hike 25bps in May, June and July with its terminal rate view now at 5.25%-5.50%.
• Fed announced that it is taking decisive actions to protect the US economy by strengthening public confidence in the bank system and approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank (SIVB). Fed said it is to provide liquidity to US depository institutions in which each Federal Reserve bank would make advances to eligible borrowers, taking as collateral certain types of securities. Fed said none of the losses by SVB will be borne by the taxpayer and it also declared a similar systemic risk exception for Signature Bank (SBNY) which was closed by its state chartering authority, while it was announced that all depositors will be made whole and will have access to all their money on Monday but shareholders and certain unsecured debt holders will not be protected.
• Fed said the core goal of the new program is to ensure bank depositors that their money is safe and there is no topline number on what will be available in the facility, while the aim is to meet demand from banks for liquidity as needed. Furthermore, it stated that the program will dramatically reduce any incentive for depositors to withdraw but owners of the two failed banks will lose their investments.
• US President Biden said the Treasury Secretary and National Economic Director reached a solution with banking regulators and the solution avoids putting taxpayer dollars at risk, while he added that American people and businesses can have confidence their bank deposits will be there when they need them, according to Reuters.
• US Treasury senior official said the steps on SVB (SIVB) were taken to stabilise the financial system and protect depositors, while they will work with Congress and financial regulators to further strengthen the financial system.
• Pershing Square's Ackman said more banks will likely fail despite the intervention, but we now have a clear roadmap on how the government will manage them.
• Canada's Superintendent of Financial Institutions took temporary control of Silicon Valley Bank's Canadian branch, according to a statement.
• Regional banks are most likely to prevail in the SVB sale process and large lenders such as JPMorgan Chase and Bank of America are likely to not be in the running to absorb SVB, while an ideal bidder would likely be a regional bank like PNC Financial, US Bank, Truist or Capital Bank, according to The Information. Furthermore, PNC Financial Group and Royal Bank of Canada were early suitors for Silicon Valley Bank but their interest has cooled, while it was also reported that the chances of Silicon Valley Bank or Signature Bank being acquired by a rival bank was unlikely as all potential buyers have so far walked away, according to people with direct knowledge of the matter cited by FT.

UK/OTHER

• HSBC (HSBA LN) has acquired Silicon Valley Bank UK Limited for GBP 1; assets and liabilities of the parent companies are excluded from the transaction. Deposits will be protected, with no taxpayer support. Customers will be able to access their deposits and banking services as normal from today.
• BoE says the wider UK banking system remains safe, sound and well capitalised. Confirms all depositors money with SVB UK is safe and secure as a result of the transaction. Adding, today’s announcement supersedes the Bank’s 10 March statement.
• Prior to this, on Friday the BoE said that it is to apply to the court to place Silicon Valley Bank UK Limited into a bank insolvency procedure and that SVB UK’s other assets and liabilities will be managed in the insolvency by the bank liquidators. BoE noted that SVB UK has a limited presence in the UK and no critical functions supporting the financial system, while the firm will stop making payments or accepting deposits in the interim, according to Reuters.
• For context: SVB UK had nearly GBP 7bln in deposits when the BoE deemed it insolvent on Friday and the government seeks to tap Middle East money to buy out the Silicon Valley Bank unit, according to FT. it was also reported that Bank of London submitted a formal proposal for the UK arm of Silicon Valley Bank, while a separate report noted that HSBC (5 HK) emerged as a potential bidder as the government races to secure an 11th-hour rescue of Silicon Valley Bank UK, according to Reuters and Sky News.
• German bank regulator orders a temporary suspension of operations on SVB Germany branch; says German branch has no system relevance.
• ECB does not plan an emergency meeting of its supervisory board, according to Reuters sources; supervisor does not see a direct impact of the SVB collapse on Eurozone banks.

EUROPEAN TRADE

EQUITIES

• European bourses are under substantial pressure, Euro Stoxx 50 -2.8%, with banking names leading the downside as contagion concern continues, SX7P -5.5%.
• Action which comes despite US and UK regulators stepping in over the weekend/Monday morning (details above) as concern remains over regional banks such as First Republic and Western Alliance Bank., -62% and -22% in the pre-market respectively.
• Stateside, futures have been faring comparably better given the backstop measures and strength in large-cap banking names; however, this has since eroded as broader sentiment deteriorated further, ES +0.1%, RTY -0.4%.
• Specifically, large-cap banking names in the US are now negative; JPM -2.5%, WFC -3.3% & BAC -5.0% in the pre-market.
• Click here for more detail.

FX

• Buck loses safe-haven mantle to the Yen, Franc and Gold.
• DXY pivots 104.000, USD/JPY probes 133.00, USD/CHF tests 0.9100 and USD/XAU approaches USD 1900/oz
• Dollar also down vs other majors irrespective of marked risk aversion, albeit off lows
• EUR/USD back below 1.0700, Cable sub-1.2100, AUD/USD under 0.6650 and NZD/USD beneath 0.6200.
• PBoC set USD/CNY mid-point at 6.9375 vs exp. 6.9380 (prev. 6.9655)
• Click here for more detail.

FIXED INCOME

• Benchmarks are firmer across the board amid a significant dovish adjustment to expected Central Bank activity.
• Specifically, USTs are firmer by in excess of a full point, though off an earlier 114.29+ peak, with Reuters pricing now having a roughly equal chance of an unchanged announcement in March or a 25bp hike from the Fed.
• Within Europe, Bunds are similarly firmer by over 200 ticks though again off best levels with the associated 10yr yield down to circa. 2.25% vs 2.55% on Friday; pricing for the ECB meeting on Thursday has seen a marked dovish move to a circa. 30% chance of 25bp compared to Lagarde's guidance for 50bp.
• Click here for more detail.

COMMODITIES

• Commodities have, ex-spot gold, come under marked pressure as risk sentiment deteriorates throughout the European morning.
• Specifically, WTI and Brent front months are lower by over USD 1.50/bbl and below/at USD 75/bbl and USD 81/bbl respectively.
• Base metals are well off best levels, given the risk tone, but are somewhat cushioned by the USD continuing to slip. Action which is assisting spot gold, alongside traditional haven allure, with the yellow metal up to USD 1893/oz at best.
• Saudi Aramco achieved a record USD 161bln profit last year and its CEO Nasser said areas of interest for potential acquisitions include China and India. Aramco's CEO noted they are looking at major expansions and are looking at the global LNG market for potential opportunities, while he anticipates a healthy demand pick-up in China and India.
• Iran said its oil exports reached the highest level since the reimposition of US sanctions and that they exported 83mln bbls of oil more since 21st March 2022 compared with the same period the prior year, according to Tasnim.
• MMG (MMG AT) announced that transportation of concentrate recommenced on March 11th after the removal of roadblocks and site operations are returning to full capacity at the Las Bambas copper mine in Peru, according to Reuters.
• Indian mining minister says Jammu and Kashmir governments to auction lithium blocks in the states.
• Click here for more detail.

NOTABLE HEADLINES

• Germany’s Verdi trade union called for a strike of security personnel at Berlin airport on Monday due to disputes regarding remuneration for working nights, weekends and bank holidays, according to Reuters.
• Riksbank is to begin selling gov't bonds on 4th April, to take place every calendar month except for July and August.

NOTABLE US HEADLINES

• Fed is to hold a closed-door meeting under expedited procedures at 11:30EDT/15:30GMT on Monday with the meeting primarily for the review and determination by the Board of Governors of the advance and discount rates to be charged by the Federal Reserve Banks.
• Goldman Sachs said it no longer expects the Fed to hike rates at the March meeting in light of recent stress in the banking system and sees US measures will provide substantial liquidity to banks facing deposit outflows and improve depositor confidence, while it still expects the Fed to hike 25bps in May, June and July with its terminal rate view now at 5.25%-5.50%.
• Click here for the US Early Morning note.

GEOPOLITICS

• Ukrainian President Zelensky said Russian forces suffered more than 1,100 dead in less than a week of fighting in Bakhmut, eastern Ukraine, according to Reuters.
• Russian Foreign Ministry said Russia’s position on the grain deal remains unchanged and that Russian representatives have not participated in any talks yet regarding extending the grain deal, according to Reuters.
• Iranian Foreign Minister said an initial agreement was reached with the US regarding exchanging prisoners, although a White House official said that Iranian claims of a US-Iran prisoner swap deal are false, according to Reuters.
• South Korea said that North Korea fired missiles from a submarine on Sunday morning and it was also reported that North Korean leader Kim convened a meeting with military leaders about practical war deterrence measures, according to Reuters and KCNA.
• Chinese President Xi is reportedly planning a visit to Moscow as soon as next week, according to Reuters sources.
• Russia's Kremlin says no comment on possible Moscow visit by Chinese President Xi next week, President Putin's participation cannot be ruled out.

CRYPTO

• Crypto markets have waned off weekend highs with Bitcoin (BTC) dipping back towards USD 22k as global risk sentiment sources.
• Crypto exchange Okcoin says USD-deposit by wire and ACH have been paused; all funds safe; order-book trading not affected; USD-withdrawal not affected.

APAC TRADE

• APAC stocks traded mixed with financials hit amid the fallout from the SVB collapse and subsequent failure of Signature Bank, although US equity futures were supported and there was also a gradual improvement in Asia following efforts to stabilise the financial system with bank deposits guaranteed and the Fed announced to make additional funding available to eligible depository institutions to assure that banks have the ability to meet the needs of their depositors.
• ASX 200 was lower with weakness seen across most industries including the top-weighted financials sector although closed off its lows owing to the resilience in commodity-related stocks and with money market rates pricing in over 75% probability of a pause at next month’s RBA meeting.
• Nikkei 225 retreated to beneath the 28,000 level with financial stocks dominating the list of worst performers.
• Hang Seng and Shanghai Comp. were positive with Hong Kong boosted by gains in tech after President Xi advocated strengthening science and technology at the closing remarks of the NPC and with Bilibili boosted following the inclusion of its Z shares to the Stock Connect, while the mainland was also kept afloat after China reported stronger-than-expected loans/financing data and surprisingly retained PBoC Governor Yi Gang as the head of the central bank.

NOTABLE ASIA-PAC HEADLINES

• China’s parliament officially approved senior government positions with Li Qiang as Premier, while Yi Gang will remain PBoC Governor and Liu Kun will remain Finance Minister, according to Xinhua.
• Chinese President Xi said China should implement a strategy of rejuvenating the country through science and education, while he added that they should work to achieve greater self-reliance, strength in science and technology, as well as promote industrial transformation and upgrading, according to Reuters.
• Chinese Premier Li said China needs to further enhance scientific and technological innovation capabilities, speed up construction of a modern market system and focus on high-quality development. Li said that China will unswervingly deepen reform and opening up, while he noted there are many favourable factors supporting China's economy but also said that China faces many difficulties this year and that it is not easy to achieve the 2023 growth target of around 5%.
• China’s NBS head Kang Yi said China’s economy still contains deep structural contradictions and problems.
• China reportedly privately suggested that the US consider a simultaneous visit by US VP Harris to China if House Speaker McCarthy decides to go to Taiwan, according to US sources cited by SCMP.
• China's city of Xi’an in the Shaanxi province revealed an emergency response plan last week that would enable it to shut schools, businesses and “other crowded places” in the event of a severe flu epidemic, according to CNN.
• BoJ: From April 5th, will implement the following measures concerning the Securities Lending Facility (SLF) and fixed-rate purchase operations for consecutive days for 10-year Japanese government bonds #367 as needed. Click here for more.
• BoJ purchases JPY 70.1bln in ETFs on Monday, via Reuters citing Central Bank disclosure.

DATA RECAP

• Japanese BSI Manufacturing (Q1) -10.5% (Prev. -3.6%); Large All Industry (Q1) -3.0% (Prev. 0.7%)