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☆ US bank lending edges up in latest week, deposits fall -Fed data
▼ + stars: | 2023-05-05 | by ( ) www.reuters.com time to read: 1 min

May 5 (Reuters) - Deposits at U.S. commercial banks fell in the week ended April 26, data released on Friday by the Federal Reserve showed, while overall credit provided by banks moved up. At large U.S. banks deposits fell to $10.54 trillion from $10.61 trillion a week earlier, on a non-seasonal basis. Deposits at small banks totaled $5.32 trillion, compared with $5.34 trillion. Total banking system credit rose to $17.37 trillion led by an increase in loans and leases to $12.11 trillion from $12.07 trillion in the previous week. Reporting by Dan BurnsOur Standards: The Thomson Reuters Trust Principles.

☆ Yen set to snap 3-week losing streak on bank jitters, dollar slides
▼ + stars: | 2023-05-05 | by ( Rae Wee | ) www.reuters.com time to read: +3 min

Although ECB President Christine Lagarde signalled more tightening to come, markets pared back their expectations on how much further rates would rise. Traders have since priced in more aggressive rate cuts from the Fed, with Fed funds futures implying a small chance that cuts could come as soon as June and through to the end of the year. The Aussie and the kiwi were among the largest beneficiaries of the sliding dollar, each rising more than 0.5% and touching multi-week highs. "For the Fed's June decision, inflation data and employment indicators ... along with bank lending standards will be key to watch. The Australian dollar was last up 0.62% at $0.6735, after touching a two-week peak earlier in the session.

☆ European Central Bank hikes rates by a quarter-percentage point
▼ + stars: | 2023-05-04 | by ( Hanna Ziady | ) edition.cnn.com time to read: +2 min

London CNN —The European Central Bank raised interest rates by a quarter of a percentage point Thursday, the smallest increase since it started hiking in July after data this week showed core inflation cooling and banks pulling back sharply on lending. The ECB targets an inflation rate of 2%. “From a historical perspective, the pace of net tightening in credit standards remained at the highest level since the euro area sovereign debt crisis in 2011,” the central bank said. The Fed also pointed to tougher bank lending standards Wednesday, as it raised its benchmark federal funds rate to a level of 5%-5.25%. A key Fed survey of bank lending activity in the first quarter will be published next week.

ECB chief Christine Lagarde said the central bank for the 20 countries that share the euro was not pausing. "This is a very restrictive policy and it will turn into credit tightening and that will bring a recession." The ECB has now increased its key deposit rate by some 375 bps since last July, from -0.5%. U.S. rates have jumped 500 bps, with the Federal Reserve hiking again on Wednesday while opening the door to a pause. Gareth Rudd, a European equity fund manager at Chelverton Asset Management, said he was negative on European bank stocks because regulators will want them to conserve capital instead of paying dividends.

The path to the pause will roll out in marquee monthly data on the key topics of jobs and prices, but also weekly series tracking emerging concerns about the financial industry. Here's a guide to what's ahead:JOBS: Next release May 5The data calendar will let the Fed receive two monthly jobs reports, covering April and May, before its June 13-14 policy meeting. For the Personal Consumption Expenditures price index, the measure used to set the Fed's 2% inflation target, only the April report will be available. Reuters Graphics Reuters GraphicsReuters GraphicsFEDSPEAK: OngoingThe Fed's internal communications rules set a "blackout" period around each policy meeting. The curtain of silence around the May meeting lifts on Friday, May 5, and Fed officials can speak publicly about their views through Friday, June 2.

☆ Cathie Wood says the credit crunch is going to get much more serious than most are expecting
▼ + stars: | 2023-05-04 | by ( Brian Evans | ) www.cnbc.com time to read: +1 min

Cathie Wood thinks a credit crunch is underway, and it's going to get much worse from here. The Ark Invest chief told TD Wealth on Wednesday that customer deposits are still leaving regional banks and going into Treasury funds, limiting the ability for banks to potentially produce loans in the future. So, "we have a feeling that we've started in the early stages of a credit crunch that is going to be much more serious than I think most are expecting." Wood cited the downward trajectory of the SPDR S & P Regional Banking ETF ( KRE ) as a basis to forecast a continued deposit outflows from regional banks. On Thursday, European Central Bank chief Christine Lagarde said tighter credit conditions would similarly weaken further bank lending.

☆ European Central Bank set to slow rate hikes as financial conditions tighten rapidly
▼ + stars: | 2023-05-04 | by ( Annette Weisbach | ) www.cnbc.com time to read: +2 min

FRANKFURT — The European Central Bank is expected to lift its benchmark rate by a smaller step of 25 basis points Thursday, as core inflation declines and its own survey data points to much tighter financial conditions in the region. The ECB has kept interest at zero, and below, for years, and has launched bond-buying program like the APP (Asset Purchase Program) and PEPP (Pandemic Emergency Purchase Program) in an effort to simulate lending. On the other hand, PEPP was a more flexible bond purchase program introduced during the coronavirus pandemic. "It's a positive sign that core inflation has fallen for the first time in a long time. In addition, the ECB's bank lending survey pointed to an exceptionally large drop in credit demand amid tighter lending criteria, adding to the case for a smaller rate hike.

A 25 basis point move, a slowdown after three straight 50 basis point hikes, appears the most likely outcome, although the bigger increase is still a possibility at what is almost certainly not the end of a historic tightening cycle. Markets see an 80% chance of a 25 basis point move while the vast majority of economists polled by Reuters were also betting on the smaller hike. Supporting a possible ECB downshift, the U.S. Federal Reserve lifted rates by 25 basis points on Wednesday and signalled it may pause further increases. At 3%, the ECB's deposit rate is already restricting economic activity, and underlying inflation has also stopped rising - at least for the time being. The ECB will announce its policy decision at 1215 GMT and Lagarde will hold a press conference at 1245 GMT.

The market swoon from what would be an unprecedented U.S. default would bludgeon away billions more in wealth. The cost to insure U.S. government debt against default has shot to the highest since the 2007-2009 financial crisis. All of that takes air out the economy's tires and could start to push up the unemployment rate, now at a historically low 3.5%. Some top economic policymakers like those at the Fed had predicted as early as last December that the unemployment rate would be roughly 1 percentage point higher by the end of 2023. A debt crisis and a default, even if only on some of the interest payments due each day, would move it forward, Bostjancic said.

☆ US private payrolls increase solidly; wage growth cools
▼ + stars: | 2023-05-03 | by ( Lucia Mutikani | ) www.reuters.com time to read: +4 min

SummarySummary Companies Private payrolls increase by 296,000 in AprilPrior month's gain revised lower to 142,000WASHINGTON, May 3 (Reuters) - U.S. private employers boosted hiring in April amid strong demand for workers in the leisure and hospitality industry, but a slowdown in wage growth offered some good news for the Federal Reserve's fight against inflation. Private payrolls increased by 296,000 jobs last month, the ADP National Employment Report showed on Wednesday. Economists polled by Reuters had forecast private employment would increase 148,000. It has not been a reliable gauge in forecasting private payrolls in the BLS employment report. According to a Reuters survey of economists, private payrolls likely increased by 160,000 jobs last month.

☆ Stocks on edge, Aussie surges after RBA surprise
▼ + stars: | 2023-05-02 | by ( Tom Westbrook | ) www.reuters.com time to read: +3 min

SINGAPORE, May 2 (Reuters) - Asian shares wobbled in cautious trade on Tuesday ahead of a series of data releases and central bank meetings, which began with a surprise rate hike in Australia that boosted the local dollar. Markets were positioned for Australia's central bank to stay on hold and a 25 basis point hike sent the Aussie dollar up about 0.8% to its highest in a week at $0.6692. Three-year Aussie government bond yields also jumped, while Australian stocks (.AXJO) slipped 0.7%. "So as well as the increase today, that's supporting the Aussie dollar," he said, though he warned that could unwind as there's a "reasonable chance" the Federal Reserve takes a similar approach at its meeting on Wednesday. Two-year Treasury yields , which track short-term U.S. rate expectations were steady at 4.1451% in Asia.

☆ Stocks on edge as traders wait on central bankers
▼ + stars: | 2023-05-02 | by ( Tom Westbrook | ) www.reuters.com time to read: +4 min

Treasury yields rose in response and expectations firmed to near certain for one final U.S. rate hike this week. JPMorgan shares rose 2.1%. The policy stands in contrast to the U.S. and Europe where central banks are deep into a hiking cycle and still going. On the monetary policy front the Reserve Bank of Australia (RBA) is first up in a week that brings central bank meetings in the U.S., Europe and Norway. Overnight, Treasury Secretary Janet Yellen said the Treasury might run out of money to cover obligations as soon as June 1.

May 3 (Reuters) - A look at the day ahead in Asian markets from Jamie McGeever. The U.S. regional banking index tanked 5.5% on Tuesday, its biggest fall since the depths of the crisis in mid-March. This may play into Malaysian policymakers' thinking as they prepare to deliver their latest interest rate decision on Wednesday. But that's what Asian markets will be waking up to on Thursday. Before that on Wednesday they have the Malaysian rate decision, services PMI data from Australia and India, and South Korean FX reserves to offer local direction.

☆ Euro zone inflation picks up but core unexpectedly slows
▼ + stars: | 2023-05-02 | by ( ) www.reuters.com time to read: +3 min

FRANKFURT, May 2 (Reuters) - Euro zone inflation accelerated last month but underlying price growth eased unexpectedly, adding to arguments for a smaller interest rate hike at the European Central Bank's regular policy meeting on Thursday. Overall price growth in the 20 nations sharing the euro currency picked up to 7.0% in April from 6.9% a month earlier, Eurostat said on Tuesday, in line with expectations in a Reuters poll of economists. Excluding volatile food and fuel prices, core inflation slowed to 7.3% from 7.5%, while an even narrower measure, which excludes alcohol and tobacco, slowed to 5.6% from 5.7%, coming below forecasts for 5.7% for its first decline since last June. In a hopeful development for the ECB, processed food, alcohol and tobacco inflation slowed a full percentage point to 14.7%, suggesting that a long-awaited turnaround in food prices may now be happening. Services inflation accelerated to 5.2% from 5.1% but the price growth of non-energy industrial goods, another crucial segments, slowed to 6.2% from 6.6%.

The Fed's meeting will be followed with expected rate increases by the European Central Bank on Thursday and the Bank of England next week. But the U.S. central bank is furthest along in the process, and may signal that this week's rate increase is the last, at least for now. Inflation has been edging down, gradually, with the main price index the Fed watches still more than double the central bank's 2% target. The anticipated quarter-percentage-point increase on Wednesday will put the target federal funds rate at roughly the same spot, between 5% and 5.25%. With this rate increase, Fed officials will hit a level that will be about 1 percentage point above the rate they consider to have a neutral impact on economic activity.

☆ Explainer: How the Fed might act in a U.S. default
▼ + stars: | 2023-05-02 | by ( ) www.reuters.com time to read: +6 min

Despite Powell's protestations, the Fed would have a role in trying to limit the harm to financial stability. In past debt-ceiling standoffs - in 2011 and 2013 - Fed staff and policymakers developed a playbook that would likely provide a starting point. English, however, had envisioned the bonds being accepted by the Fed at a market price that would likely be impaired by their defaulted status. But, following the bank failures in March, the Fed has a new bank lending facility - one that allows securities with impaired prices to be pledged at face value. Ben Bernanke, Fed chair at the time, quipped: "So you are willing to accept 'loathsome' under some certain circumstances," drawing laughter from others on the call.

And an ECB survey of lending data for March revealed banks were tightening access to credit even as demand for it from borrowers collapsed, resulting in the slowest pace of growth in credit to households since 2018. And it was mirrored by March lending data, which showed growth in corporate credit slow to 5.2% year on year. "With the next big TLTRO expiring towards the end of June amid further key rate hikes, credit demand will be further dampened," Martin Wolburg, senior economist at Generali Investments, said. There was a smaller decrease in demand for consumer credit and other lending to households. Lending data also showed the annual increase in lending to households slowing to 2.9% from 3.2%.

LONDON, May 1 (Reuters) - Inflation in the euro area is too high for comfort, meaning markets expect the European Central Bank to deliver its seventh straight interest rate hike on Thursday. 1/ How much will the ECB hike rates by on Thursday? Most analysts expect at least one more rate move after Thursday, even as the Federal Reserve looks set to pause its rate hike campaign. Market pricing suggests ECB rates will peak around 3.6% this year, and Belgium's central bank governor Pierre Wunsch says he wouldn't be surprised to see rates rise to 4%. Tuesday's bank lending should offer some clues but it might be too early to gauge the full impact of the March banking crisis on financing conditions.

New York CNN —The collapse of First Republic Bank is unlikely to worsen the US economic outlook, JPMorgan CEO Jamie Dimon said Monday. Dimon told CNN’s Poppy Harlow early last month that the stress in the banking system had increased the odds of a US recession. The bank had $100 billion in those deposits withdrawn from the bank during the first quarter, it reported last week. “The American banking system is extraordinarily sound,” he said. But he agreed with Dimon that the seizure of First Republic, however, does not shift those forecasts, he told CNN Monday.

☆ Elite investors overseeing trillions warned the crowd at Milken about a looming US credit crunch. Here's how 2 of them say they're planning to capitalize.
▼ + stars: | 2023-05-01 | by ( James Faris | Akin Oyedele | ) www.businessinsider.com time to read: +3 min

Leaders of major asset management firms discussed the prospect of a credit crunch at the 2023 Milken Global Conference. They shared how they're planning to capitalize on the dislocations that arise. The tighter environment was top of mind during an economics panel at the 2023 Milken Global Conference, with multiple participants warning of an impending credit crunch. "The commercial real estate sector in particular, which was 50%-plus from the regional banking system, is definitely going to be limited." Hunt also discussed how PGIM is planning to react to a credit crunch: by continuing as normal and trying to absorb more market share from traditional banks.

The hedge funds said they can share ideas, but cannot reveal their trading positions for regulatory reasons. Reddy said he preferred senior unsecured bank debt, that allowed bondholders payment ahead of some other creditors in the event of an insolvency. Taking bearish positions on banks that lend to smaller and medium sized firms could prove opportunistic if the economy weakens, he added. Trend-wise the Japanese yen should continue to weaken," said Chua, noting that central banks in Asia have slowed or paused rate hikes. Insurers, which holds commercial mortgage-backed securities and property, will likely feel pressures on CRE, he said.

☆ Take Five: Rate hike vs bank stress
▼ + stars: | 2023-04-28 | by ( ) www.reuters.com time to read: +5 min

The Fed is expected to deliver another 25-basis point interest rate increase on Wednesday and signal a pause in its most aggressive rate-hiking cycle since the 1980s. Futures markets show investors pricing an nearly 90% chance of a rate increase. But confidence in a 25 bps rate hike has wavered in recent days after problems at lender First Republic reignited concerns over the U.S. banking sector. Yet, key inflation and bank lending data releases in the days ahead could sway that outcome. Tuesday's flash April inflation data is likely to confirm underlying price pressures - running above 5% - remains uncomfortably high.

☆ Digital “Chicago Plan” fixes many financial woes
▼ + stars: | 2023-04-28 | by ( Edward Chancellor | ) www.reuters.com time to read: +7 min

The economists’ solution – often called the Chicago Plan – was to remove commercial banks from the money-creating business. One of the main problems of a central bank digital currency (CBDC) is that it would compete with old-fashioned bank deposits. With the digital money supply increasing in line with the economy’s potential growth, roughly as Friedman advised, inflation would soon come under control. Non-bank lenders like Apollo Global Management (APO.N) would have an enhanced role under the digital Chicago Plan. At present, there’s little chance of the digital Chicago Plan coming to pass.

☆ Here are the 4 issues that will determine the future of the global economy, according to Mohamed El-Erian
▼ + stars: | 2023-04-28 | by ( Morgan Chittum | ) www.businessinsider.com time to read: +3 min

Mohamed El-Erian says there are four issues that will shape the future of the global economy. El-Erian say the Fed's efforts to reduce inflation and the US debt ceiling are key factors looking ahead. Sign up for our newsletter to get the inside scoop on what traders are talking about — delivered daily to your inbox. download the app Email address By clicking ‘Sign up’, you agree to receive marketing emails from Insider as well as other partner offers and accept our Terms of Service and Privacy PolicyIt is an uncertain time for the global economy. As narratives continue to shift, Wall Street's views range from predictions of a full on stock market crash to a soft landing of the economy.

☆ Wall Street Investors Recession Bet May Cause Bond, Stock Market Crash
▼ + stars: | 2023-04-27 | by ( Neil Dutta | ) www.businessinsider.com time to read: +10 min

And it's becoming increasingly clear that the bond market is reading the economic tea leaves all wrong. On the economic side, the bond market view would probably look something like the Fed's latest GDP projections. So if the bond market ends up being right about the economy, there would be a serious, ugly wake-up call for the stock market. I don't think the Wall Street aphorism about the bond market being "right" holds up this time. On the other hand, the bond market would take it squarely on the chin.

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