Half a million jobs were added according to the January employment report, yet the raw data suggests it was more a case of warm weather reducing the usual seasonal firings with favourable seasonal adjustments providing an additional boost. February is likely to revert to the 200k trend with downside risks for coming months as lay-offs rise.

The January jobs report was far stronger than expected and combined with the jump in retail sales and firm inflation data suggests that the economy is more resilient than thought. Comments from Fed officials became more hawkish in the wake of these reports and the market mindset firmly moved in the direction of interest rates needing to stay higher for longer.

We then shifted our view on the outlook for Federal Reserve monetary policy to be broadly in line with the market pricing of 25bp hikes at the March, May, and June Federal Open Market Committee meetings. (ING - Continue Reading) 

Silvergate Capital’s abrupt shutdown and SVB Financial Group’s hasty fundraising have sent US bank stocks diving and tongues wagging across the industry: Could this be the start of a much bigger problem?

The issue at both once-highflying California lenders was an unusually fickle base of depositors who yanked money quickly. But below that is a crack reaching across finance: Rising interest rates have left banks laden with low-interest bonds that can’t be sold in a hurry without losses. So if too many customers tap their deposits at once, it risks a vicious cycle.

Across the investing world, “people are asking who is the next one?” said Jens Nordvig, founder of market analytics and data intelligence companies Exante Data and Market Reader. “I am getting lots of questions about this from my clients.” (BBG - Continue Reading) 

The Bank of Japan maintained its easing stance, sending the yen and bond yields lower, as Governor Haruhiko Kuroda held his final meeting after a decade of massive stimulus.

The decision came shortly after parliament formally approved Kazuo Ueda to succeed Kuroda in April. Leading up to the meeting, multiple BoJ watchers had warned of the risk that Kuroda might adjust or scrap the central bank’s easing program to pave the way for a fresh start for Ueda, expectations that were dashed by the stand-pat decision.  

Ueda will face the challenge of how to manage a stimulus program showing signs of strain and how to pare it back without jolting markets should the central bank under his leadership judge that its inflation target has finally been achieved. (BBG - Continue Reading) 

The peak for European Central Bank interest rates will be much higher than thought only a month ago, according to economists polled by Reuters, and they added that stubbornly high inflation would push policymakers to be more aggressive.

Having flagged a 50 basis-point lift next week at the previous Governing Council meeting, ECB President Christine Lagarde doubled down on Sunday and said the increase was "very very likely". 

All 60 economists polled by Reuters March 7-9 believed her and said the bank's deposit rate would rise 50 basis points to 3.00% on Thursday. Medians in the poll showed the euro zone's central bank adding 25 basis points at the following three meetings in May, June, and July to give a terminal deposit rate of 3.75%, higher than the 3.25% peak expected in a February poll. (RTRS - Continue Reading)