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Markets have ramped up bets on further rate increases after the ECB has already tightened monetary policy by 3 percentage points since July. ECB President Christine Lagarde reckons a 50 basis points (bps) rate hike "is very, very likely". "The ECB is prioritising getting policy rates as high as needed and nothing else is as important," Pictet Wealth Management's head of macroeconomic research Frederik Ducrozet, said. Signs of economic resilience suggest ECB growth forecasts, also out on Thursday, could be revised upwards for 2023. Falling energy prices and a stronger euro, up around 6% in trade-weighted terms from August lows, suggest headline inflation forecasts could be revised lower.

☆ Hedge funds stand to lap up bearish profits from bank stock rout
▼ + stars: | 2023-03-13 | by ( Nell Mackenzie | ) www.reuters.com time to read: +2 min

LONDON, March 13 (Reuters) - Hedge funds ended last week positioned to scoop up winning profits from bearish positions on bank stock falls, according to a note by Goldman Sachs sent to clients late on Sunday. They sold financially themed shares and banks for nine straight weeks but rather than only exiting long positions, funds added bearish bets, according to the note seen by Reuters. Financials was the most net sold sector globally for Goldman Sachs's prime brokerage division, the part of the bank which serves hedge funds, the note said. Hedge funds not only exited bullish positions on bank themed equities, they added short positions as of Friday, betting bank shares would fall, the Goldman note said. Regional and smaller U.S. bank shares have slid on concerns of a broader fallout in the banking sector.

☆ World markets set for aftershocks as SVB collapse ripples out
▼ + stars: | 2023-03-12 | by ( Dhara Ranasinghe | ) www.reuters.com time to read: +5 min

LONDON, March 12 (Reuters) - Markets were set for a bumpy ride this week as the fallout from collapsed startup-focused lender Silicon Valley Bank (SVB), the biggest U.S. bank failure since the 2008 financial crisis, coincides with key economic data and policy meetings. It later recovered most of its losses after Circle, the firm behind it, assured investors it would honour the peg despite exposure to Silicon Valley Bank. SVB could have a domino effect on other U.S. regional banks and beyond. The S&P 500 regional banks index (.SPLRCBNKS) dropped 4.3%, bringing its loss for the week to 18%, its worst week since 2009. UK finance minister Jeremy Hunt's UK budget may be overshadowed by the SVB fallout in Britain.

☆ Dollar demand picks up sharply as turmoil in banks rattles investors
▼ + stars: | 2023-03-10 | by ( ) www.reuters.com time to read: 1 min

LONDON, March 10 (Reuters) - Demand for U.S. dollars in the currency derivative markets surged on Friday to its highest since mid-December, after a meltdown in U.S. banking stocks ignited a wave of investor risk aversion. Three-month euro/dollar cross currency basis swap spreads traded as negatively as -17 basis points , the most since December 14, reflecting a pickup in demand for hard cash. They were last trading at -14. An index of European banks (.SX7P) was heading for its biggest one-day fall since last June, as shares in the region's biggest lenders dropped in sympathy with a steep decline in the value of Wall Street's biggest lenders on Thursday. Reporting by Amanda Cooper; Editing by Dhara RanasingheOur Standards: The Thomson Reuters Trust Principles.

☆ Take Five: A macro-packed punch for markets
▼ + stars: | 2023-03-10 | by ( ) www.reuters.com time to read: +5 min

1/ THE PRICE IS RIGHTU.S. inflation data have been pivot points for markets and Tuesday's report will likely be consequential as investors gauge whether the Federal Reserve will return to the jumbo-sized rate hikes that shook markets last year. The European Central Bank has raised rates by 3 percentage points since July to 2.5% and looks set for another half-point increase on Thursday. Austria's central bank chief Robert Holzmann wants half-point rises at each of the next four meetings. Riskier, more fragile emerging markets, especially those with twin deficits, could feel the heaviest punch if the Fed goes all the way to 6%. Emerging markets countries hiking (+) or cutting (-) their policy ratesCompiled by Amanda Cooper; Graphics by Pasit Kongkunakornkul, Kripa Jayaram and Vincent Flasseur; Edited by Shounak DasguptaOur Standards: The Thomson Reuters Trust Principles.

SummarySummary Companies Tech bank's troubles panic marketsFears spread over fallout from rising interest ratesBanks vulnerable as bond values dropLONDON, March 10 (Reuters) - For months, investors had shrugged off the threat of rising interest rates. In SVB's case, venture capital clients, unable to raise cash elsewhere, pulled money from the bank, forcing its hasty sale of bonds at a loss. In February, U.S. regulators said U.S. banks had unrealised losses of more than $620 billion on securities, underscoring the scale of the risks. Jason Benowitz, senior portfolio manager at CI Roosevelt, said SVB's risks were not unique with many banks sitting on such unrealised losses because rates have moved so rapidly. "The SVB situation is a reminder that many institutions are sitting on large unrealised losses," said AJ Bell investment research director Russ Mould.

☆ SVB collapse a sign of pain coming from end of easy-cash era
▼ + stars: | 2023-03-10 | by ( ) www.reuters.com time to read: +6 min

LONDON, March 10 (Reuters) - The easy-cash era is over and its impact is only just starting to felt by world markets yet to see the end of the sharpest interest rate hiking cycle in decades. European banks slid on Friday after JPMorgan (JPM.N) and BofA (BAC.N) shares fell over 5% on Thursday. BofA noted European banks' bond holdings have not grown since 2015. And with defaults rising, the focus is on the less visible private debt markets, which have ballooned to $1.4 trillion from $250 billion in 2010. Reuters Graphics5/FOR SALEReal estate markets started cracking last year and house prices will fall further this year.

CASE FOR A SWIFT RETREAT1/ ENERGY PRICESTumbling energy prices are pulling down headline inflation. U.S. inflation rose 6.4% in January, the smallest rise since October 2021, from a 9.1% high last June. Instead, corporate profits have accounted for the lion's share of domestic euro zone price pressures since 2021, ECB data shows. A recent IMF study going back to the 1960s found that only in a small minority of cases where wages and inflation rose together for several quarters did sustained inflation result. The chief executive of Gunvor, a top oil trader, sees oil prices rising in the second half of 2023 on renewed Chinese demand.

☆ Markets start signalling Fed may be going too far - Amundi
▼ + stars: | 2023-03-09 | by ( Yoruk Bahceli | ) www.reuters.com time to read: +3 min

Marasciulo said bond market valuations looked better than a month ago after a sell-off that has seen benchmark U.S. and German government bond yields rise around 40 bps since February started. Near-term, Marasciulo said it made sense to bet against the market consensus, by favouring a 25 bps move from the Fed, through trades favouring a steepening of the U.S. yield curve. On the Bank of Japan, which meets on Friday for the last time under outgoing governor Haruhiko Kuroda, Marasciulo said an end to yield curve control is "very likely". "So some sort of reaction function from the BOJ would tell us that probably the yield curve control should be the first thing to be reconsidered." A termination of yield curve control, which has helped pin down Japanese government bond yields, would steepen global yield curves by raising risk premiums on bonds overall, Marasciulo added.

☆ Stock pickers reckon it's time to move on from central banks
▼ + stars: | 2023-03-06 | by ( Naomi Rovnick | ) www.reuters.com time to read: +5 min

LONDON, March 6 (Reuters) - Stock market investors are calling time on the idea that the Federal Reserve, and other major central banks, have their back. The Nasdaq (.IXIC) is still up about 12% year-to-date and a sub-index of European tech stocks has gained 15% (.SX8P). A Reuters poll of 300 global asset managers last month showed 70% of those surveyed believed these so-called value stocks would outperform this year. Another sign investors are turning towards value shares is the reduced premium they are paying for growth stocks. "Central banks will keep rates high."

☆ London court allows 'unprecedented' stranded Russian share sale
▼ + stars: | 2023-03-03 | by ( Naomi Rovnick | ) www.reuters.com time to read: +2 min

LONDON, March 3 (Reuters) - London's High Court has ruled that the administrators of Sova Capital, a collapsed London broker formerly controlled by Russian banker Roman Avdeev, can employ a novel deal structure to swap a portfolio of Russian shares. The broker collapsed a year ago as Western sanctions hit businesses with Russian ties. In his ruling, the judge noted that "MOEX prices for the Russian Securities are no more than nominal for Sova". Another constraint, he said, was Sova's ability to get cash from a sale of securities that were "effectively trapped". ($1 = 0.8338 pounds)Reporting by Naomi Rovnick; Editing by Dhara Ranasinghe and Alexander SmithOur Standards: The Thomson Reuters Trust Principles.

☆ Take Five: A manic March
▼ + stars: | 2023-03-03 | by ( ) www.reuters.com time to read: +5 min

Another dose of hot job growth after January's payrolls increase of 517,000 trounced estimates could stoke fears of more hawkish Fed action. Powell has said the January jobs report showed why the battle against inflation will "take quite a bit of time". Powell's comments and the jobs data could help settle what the Fed does later this month. The RBA hinted at further tightening at its meeting last month, but data since then has pointed the other way. After a red-hot January rally, bonds and equities retreated in February as strong data sparked concerns about more rate hikes.

☆ Hedge funds that did best in 2022 could fare worst in 2023 – BNP
▼ + stars: | 2023-03-01 | by ( Nell Mackenzie | ) www.reuters.com time to read: +2 min

REUTERS/Brendan McDermidLONDON, March 1 (Reuters) - Trend following hedge funds that outperformed rivals in 2022 will likely underperform this year, according to investors surveyed by BNP Paribas in a report published this week. The global survey of 185 investors in December and January also showed the investor community was undecided on putting money in hedge funds generally, given volatile markets. Almost 30% of investors surveyed increased portfolio allocations to hedge funds in 2022, while more than 20% reduced them. Reuters GraphicsOverall, hedge funds perform better than most other asset classes in an environment of higher inflation and higher interest rates, said Naidoo. "Possibly this might be a catalyst for people to increase their portfolio allocation to hedge funds," he said.

☆ Analysis: Traders relaxed as ECB starts running down massive bond holdings
▼ + stars: | 2023-03-01 | by ( Yoruk Bahceli | ) www.reuters.com time to read: +6 min

So far traders are optimistic, comforted by an initially small pace of bond sales and a predictable structure. U.S. and UK central banks have started QT, although the Bank of England was forced to delay its plans following turmoil in British bond markets last year. said DZ Bank's head of government bond trading Dalibor Jarnevic. If APP reinvestments stop before the end of 2024, ECB market presence would rely on reinvestments under the more flexible Pandemic Emergency Purchase Programme (PEPP). Whatever the size or pace, traders are seeking opportunities as the ECB makes the shift to QT.

That has pushed 10-year bond yields across the euro area to levels last seen during the bloc's 2011-2012 debt crisis , . "Equity markets appear expensive when considering the possibility of prolonged higher rates." Patrick Saner, head of macro strategy at Swiss Re, added that rising government bond yields also made risk assets relatively less attractive. And while government bonds were seen vulnerable to further selling, higher yields are still viewed as a buying opportunity. "In sovereign markets now, 10-year German bond yields are north of 2.70%.

Summary U.S. bonds set for worst month since SeptWild swings at start of year may continueLONDON, Feb 28 (Reuters) - March madness? After a euphoric January was followed by a somber February, with bonds and equities selling off as strong data renewed rate-hike bets, more wild swings could be next for world markets. February fallsData on Friday showing a key inflation U.S. gauge accelerated last month stoked rate hike bets. The ECB lifted its key rate by 300 basis points since last July to 2.5%. If upcoming data weakens, markets could resume their bullishness, Yardeni Research said.

☆ Banks pile into euro zone bond sales as rates shoot up
▼ + stars: | 2023-02-28 | by ( Yoruk Bahceli | ) www.reuters.com time to read: +4 min

Heavy central bank buying had kept borrowing costs and volatility low for years, so the key question now is who steps in as the ECB steps out. They were the top buyers in the European Union's debt sale this month, buying almost 50% of a seven-year bond and 35% of a 20-year bond. Banks also took 39% of an Italian 20-year debt sale in January, while fund managers took 25%. In a 16-year debt sale last year, banks bought 29%. Bank treasuries took 30% of a 30-year Belgian debt sale in February, versus 10% a year ago.

☆ European high yield debt looks increasingly vulnerable, Deutsche Bank says
▼ + stars: | 2023-02-27 | by ( Chiara Elisei | ) www.reuters.com time to read: +2 min

LONDON, Feb 27 (Reuters) - European high yield corporate debt is increasingly vulnerable as the global economy slows, suggesting a higher risk of defaults, Deutshe Bank said in a note on Monday. Sales of new high yield bonds got off to a promising start in January, but slowed in February as volatility in interest rate markets weighed, the note said. Nearly 60% of new high yield bond sales came from financials, corporate hybrids - a type of security that has bond and equity features - or fallen angels recently downgraded from investment grade to junk. "Genuine" issuance of lower rated credit was just over 6 billion euros ($6.34 billion). Deutsche said it expected around 55 billion euros in high yield bond supply in 2023, 15 billion euros more than in 2022, and anticipated a marginal increase in merger and acquisition and leveraged buyout activity in the first half of the year.

☆ One year of war in Europe: How the dollar, energy and food prices swirled
▼ + stars: | 2023-02-24 | by ( ) www.reuters.com time to read: +6 min

LONDON, Feb 24 (Reuters) - Russia's invasion of Ukraine has disrupted economies and markets around the world, from energy and food prices to European banks, emerging market stocks and the Russian currency. Below are five charts that show how Europe's biggest conflict since World War Two has shaped global financial markets in the last 12 months. But when Russian tanks rolled into Ukraine in late February, European natural gas prices rocketed by almost 400% in two weeks. Energy prices soared, bringing the threat of blackouts, recession and a worrying switch back to dirtier sources of fuel. Food price pressures are easing, but that does little to soften the blow for many developing nations, where food and energy prices make up a larger share of spending.

☆ Take Five: Strap in for no landing
▼ + stars: | 2023-02-24 | by ( ) www.reuters.com time to read: +5 min

1/ FED VS STOCKSReports on U.S. durable goods orders, home prices as well as manufacturing and consumer confidence threaten to cement expectations of more Fed rate hikes and to deal a knockout punch to the early-year stocks rally. Evidence of a stronger-than-expected economy has forced investors to recalibrate projections for Fed hawkishness, lifting bond yields and weighing on stock gains. Tuesday's consumer confidence data may be of particular interest, offering a glimpse into households' views on economic prospects and inflation expectations. The idea of "no landing," which upends a host of popular trades based on a the scenario of the global economy entering recession is gaining traction thanks to surprisingly upbeat data. A soft landing could still happen.

[1/3] A man wearing a protective mask is seen inside the Shanghai Stock Exchange building, as the country is hit by a new coronavirus outbreak, at the Pudong financial district in Shanghai, China, February 28, 2020. REUTERS/Aly Song/File PhotoNEW YORK/SINGAPORE, Feb 24 (Reuters) - Many large money managers are steering clear of Chinese assets, missing out on the nation's post-COVID stock market rally in the latest example of strategic concerns trumping juicy returns. "For our investors who might have that concern, there are plenty of other opportunities away from China." The concern flagged by some is whether this is part of a structural downgrade for Chinese assets, said Will Malcolm, a Singapore-based portfolio manager at Aviva Investors. That could attract cash in a hurry, but the behaviour of large investors so far suggests that a large sentiment shift will be needed.

But recent data reflecting still tight jobs markets has traders entertaining a new scenario where economic growth holds up and inflation remains sticky. World stocks hit one-month lows on Wednesday, while Wall Street had its worst day of the year so far on Tuesday. "We've gone from softer landing to no landing - no landing being that (financing) conditions will remain tight," said David Katimbo-Mugwanya, head of fixed income at EdenTree Asset Management. Bond prices fall, and yields rise, when expectations of higher rates on cash make their fixed interest payments less appealing. Reuters GraphicsEuro zone recession expectations mostly faded in mid January as energy prices tumbled.

☆ Deutsche bank lifts forecasts for ECB terminal rate to 3.75%
▼ + stars: | 2023-02-22 | by ( ) www.reuters.com time to read: 1 min

LONDON, Feb 22 (Reuters) - Deutsche Bank has lifted its forecast for where the European Central Bank's key rate will rise to in this tightening cycle to 3.75% from 3.25%, the German bank said in a note on Wednesday. Deutsche economists now expect the ECB to raise interest rates by 50 basis points (bps) at its March and May meetings, followed by a final hike of 25bp in June. They had previously expected a 50 bps hike in March and a final 25 bps rise in May. A more resilient economy and jobs market alongside hawkish central bank rhetoric was behind the forecast change, the note said. The ECB hike rates by 50 bps to 2.5% earlier this month.

☆ Hedge fund manager Chris Hohn demands Airbus drop Atos deal - letter
▼ + stars: | 2023-02-20 | by ( Nell Mackenzie | ) www.reuters.com time to read: +2 min

LONDON, Feb 20 (Reuters) - Hedge fund manager Christopher Hohn has written to Airbus (AIR.PA) demanding it drop a deal to purchase a minority stake in French IT consulting firm Atos' (ATOS.PA) soon-to-be spun-off division Evidian. Hohn, who runs hedge fund TCI Fund Management, owns over 3% of Airbus' shares worth more than 4 billion euros ($4.3 billion), the letter said. If successful, the deal would give Airbus some say over Evidian, which groups Atos' most coveted assets such as cybersecurity division BDS and supercomputers. Hohn, in the letter, said if the deal goes through Airbus should disclose what it would spend to pay down any debt or other liabilities of Atos. Airbus shares were down 2% in afternoon trading, while Atos' shares were down 0.3%.

☆ How big hedge funds would trade sticky inflation
▼ + stars: | 2023-02-16 | by ( Nell Mackenzie | ) www.reuters.com time to read: +5 min

LONDON, Feb 16 (Reuters) - Hedge funds, pinning little hope on central banks' attempts to cool inflation, are spotting ways to profit from climbing interest rates. Five prominent hedge funds shared five ideas using five different asset classes to profit from inflation so pugnacious it might force the Federal Reserve to keep interest rates higher for longer. Lancaster favours a trade selling long-term borrowing costs against shorter-term ones, on the view that the spread between them will decline. "Concern now for markets is that reacceleration of the economy will lead to higher terminal rates," said Lancaster. Buying U.S. long-dated natural gas futures for these reasons and also, he added, "in an inflationary cost/wage environment looks compelling."

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