Must read: SVB fallout, cryptocurrencies, UK unemployment

Our head of investment rounds up the morning's big news.

GLOBAL MARKETS 

In a frenetic period for markets, European indices have started the session oscillating between gains and losses, with the FTSE 100 trading lower while the DAX is currently in the green. Land Securities Group (LSE:LAND), British Land Co (LSE:BLND) and Rightmove (LSE:RMV) are among the outperformers on the UK index amid hopes of a dovish tilt from the Bank of England.

Most European banks continue to face selling pressure with HSBC Holdings (LSE:HSBA) and Standard Chartered (LSE:STAN) near the bottom of the FTSE 100. Credit Suisse Group AG (SIX:CSGN) is leading the declines across European financials after the Swiss lender said it found ‘material weakness’ in its internal financial reporting controls, adding to its woes. 

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Markets in Asia fell sharply overnight with the Nikkei, the Korean Kospi index and the Hang Seng down more than 2% each. In Japan its biggest banks suffered steep losses, with the TOPIX Banks index down by more than 7% after President Biden’s address failed to soothe investors.  

US futures are pointing higher after indices on Wall Street closed mixed on Monday, with the Nasdaq closing in the green. However, the Dow suffered its fifth day of declines and the Russell 2,000 ended down 1.6%. First Republic Bank (NYSE:FRC) plunged nearly 62% and Western Alliance Bancorp (NYSE:WAL) slumped 47%. Wall Street heavyweights like JPMorgan Chase & Co (NYSE:JPM), Citigroup Inc (NYSE:C) and The Goldman Sachs Group Inc (NYSE:GS) look set to recoup some losses at the US market open at lunchtime.

Markets have been weighing up concerns about financial contagion from the SVB Financial Group (NASDAQ:SIVB) fallout versus the consequent possibility of less aggressive tightening from the Federal Reserve next week. Traders are now pricing in a 50% chance of no change to interest rates in March, a significant climb down from expectations for a hike of between 25-50 basis points just last week. Nomura has gone a step further and is forecasting that the Fed could even cut interest rates next week in what would be a major U-turn in central bank policy. 

This has prompted significant volatility for the bond market, with the two-year US treasury yield posting its biggest one-day drop since 1987 as bond prices rebound.

CRYPTOCURRENCIES 

Cryptocurrencies have been rallying amid the banking crisis. Bitcoin is up almost 20% since Friday, trading above $24,300. Concerns about the traditional banking sector and falling treasury yields have prompted cryptocurrency buying. 

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USD Coin or USDC rebounded from a record low over the weekend sparked by nervousness about its links to Circle, a depositor at Silicon Valley Bank. Intervention from the US authorities to ensure that Circle’s USDC reserve deposits at SVB sparked a recovery for cryptos.

UK UNEMPLOYMENT

The UK unemployment rate from November to January hit 3.7%, slightly better than analysts’ expectations for 3.8%. The UK employment rate hit 75.7%, up 0.1 percentage points versus the previous three months. Vacancies fell during the quarter for the eight consecutive period to 1.124 million, while the redundancy rate increased on the quarter and is back to pre-Covid levels. 

Three-months average weekly earnings excluding bonuses grew by 6.5%, modestly below expectations for 6.6%. Taking inflation into account, this figure fell by 2.4%. Including bonuses, real wages fell by 3.2%. For private sector workers average regular pay growth hit 7% versus the public sector up 4.8%. 220,000 working days were lost because of labour disputes in January, down from 822,000 in December. 

The headline unemployment rate improved thanks to a pick up in part-time and self-employed workers. Businesses remain cautious about recruiting staff, particularly those on full-time contracts, with vacancies on the decline because of the shaky economic backdrop and elevated costs. Work was significantly disrupted during the three months by heavy industrial action, particularly in December. 

While public and private sector pay increased, once inflation was accounted for, workers suffered one of the largest real terms pay drops since records began, adding to cost of living pressures and the feelings of discontent within the work force.